Positive news from Brexit negotiations helps Pound hit a 2 month high against the US Dollar
The pound to US dollar exchange rate has seen volatility this last week. Today the GBP/USD interbank rate reached a high of 1.2582, its strongest since July 5th, or 11 weeks. In part, this is because there have been lots of reports of progress in the Brexit negotiations. These include renewed optimism on the part of European Commission (EC) President Jean-Claude Juncker, and confirmation that the UK has sent its draft Brexit amendments to the EU.
To begin with, EC Commission President Mr. Juncker told Sky News yesterday that he “thinks we can have a deal”. This is the first time that Mr. Juncker or any other senior EU leader has confirmed that the UK’s existing draft Withdrawal Agreement can be renegotiated, so indicates that the EU is now taking a more flexible approach to the Brexit talks.
Meanwhile, the pound to US dollar exchange rate has also risen, because it’s been confirmed that the UK has forwarded its draft Brexit amendments to the EU, to be reviewed. Until earlier this week, the UK government was refusing to publicise its Brexit plans or share them with the EU, for fear that they’d be “rubbished”.
However, a UK government spokesperson has confirmed that: “confidential technical non-papers which reflect the ideas the UK has been putting forward” have been shared with Brussels. This also points to the increasing likelihood of a Brexit deal.
Philadelphia Federal Reserve’s manufacturing survey & US home sales beat forecasts
Meanwhile, turning to the United States, the latest US economic data has exceeded expectations. To begin with, the Philadelphia Federal Reserve’s monthly manufacturing survey reached 12.0 this month, above economists’ forecasts for 11.0. This signals resilience at Philadelphia’s factories, in spite of America’s and China’s trade war.
Meanwhile, US existing home sales surprisingly rose by +1.3% in August compared to July, said the National Association of Realtors yesterday, above predictions for a -0.4% fall.
These are among America’s first economic releases, following the Federal Reserve’s (Fed) decision to cut interest rates earlier this week, by -0.25%, to 1.75%-2.00%. Fed Chairman Jerome Powell said that the US central bank reduced borrowing costs “to keep the economy strong”. The upbeat data may help convince the Fed to refrain from cutting interest rates further in future, which might affect the value of the US dollar.
For more information on factors affecting GBP/USD exchange rates or if you would like to chat with an expert on the ins and outs of transferring money overseas, please do get in touch to discuss further.