Pound to US Dollar forecast: Pound takes comfort from Brexit extension

Pound to Dollar Rate Falls Sharply

Just when you thought we had enough political portmanteaus to last a lifetime – from Brexit and Brexthrough to Regrexit and Remoaner – along comes another. We can thank Donald Tusk for the latest addition to the list, after EU leaders agreed in principle to extend Brexit until 31 January 2020, which he labelled a “flextension”. This flexible extension of Brexit means the UK won’t leave the EU as planned on Thursday, but it could happen before the deadline if a deal’s approved by Parliament.

The announcement from the EU27 caused the pound to rally yesterday, edging higher against the US dollar. The GBP to USD interbank rate took some comfort in the news that a ‘no deal’ Brexit is off the table – for the time being at least – despite political uncertainty being given an extension in the process.

PM to make fourth general election bid

The Commons backed the government’s general election motion yesterday, but the prime minister fell well short of the two-thirds majority needed under the Fixed-term Parliaments Act. Boris Johnson will, therefore, attempt to secure an early election for a fourth time today, by publishing a bill proposing a poll on 12 December that only needs a simple majority to succeed. These developments checked the slight pound vs us dollar flextension inspired gains experienced earlier on Monday.

Trump gives trade deal hint

The EU’s flextension announcement outweighed news that progress is being made in trade talks between China and the US. Donald Trump has predicted that he will agree on a preliminary trade deal with China soon; raising hopes that it could be signed off at next month’s meeting of Asia-Pacific world leaders. The US President said: “We are looking probably to be ahead of schedule to sign a very big portion of the China deal; we’ll call it Phase One but it’s a very big portion”. If Chinese and US officials do put pen to paper, the pound to us dollar rate could come under added pressure.

Looking ahead

The US Federal Reserve (Fed) is widely expected to cut interest rates for the third time this year on Wednesday. What traders are unsure of is whether it will signal the end of the easing cycle, or if more cuts are on the cards.

The Fed rate decision comes a few hours after the release of a third-quarter Gross Domestic (GDP) report from the US, which is expected to reveal the economy grew by 1.7% in the three months to September – this would represent a reduction in growth, following a 2% expansion in the second quarter.

For more information on how these factors could impact the GBP to USD interbank exchange rate, please get in touch with one of our Account Managers on +44 (0)1494 360 899 or complete the form below for a call back.