GBP gains against the US dollar
Tuesday 18 August, 2020
Daily Currency UpdateGBP - British PoundSterling remained range round through much of Monday as investors brace for more volatility ahead of new trade talks between the UK and EU. Main topics of discussion include Fisheries’ rights and the UK’s financial sector's access to the Unions markets.Officials are racing to find a compromise before the end of 2020 when the UK will be set adrift from the common market, relinquishing all preferential trade agreements. Unless a deal can be struck Sterling faces significant headwinds. The UK was one of the worst hit European countries by the Pandemic and has suffered the biggest economic contraction of any G7 nation. Failure to secure favourable ongoing trade conditions could be a catalyst to break the back of the recent GBP run and force a correction back toward 1.20.Saying that, a Spokesman from Boris Johnson’s office insisted that the govt. will continue to work at ways to “plug the gaps” in a potential deal to be reached in September. The positive comments provided some mild optimism for GBP and ensured it continued rising for a fourth day in a row. Investors will be hoping further positive comments come from both sides after today's talks.
Key MoversThe US dollar was on the back foot yesterday, spurred by Covid-19 concerns as latest official figures put the number of cases in the country at over 5.4 million, with the death toll now surpassing 170K. Concerns remain over the US-China relationship, however, the indefinite postponement of the trade pacts review, leaving the original one intact, saw risk appetite improve. Further comments from US commerce Secretary, Wilbur Ross, that China was buying large amounts of US agricultural products ahead of the phase-one trade deal review was taken quite positively by markets and further bolstered risk appetite. Attention now turns to the Federal Reserve bank's FOMC meeting minutes due tomorrow. Having maintained the status quo investors will be seeking any sign the Federal Open Market Committee is preparing to amend its policy platform, particularly an adjustment to average inflation targets. A dovish review will likely add further pressure on the already embattled dollar.
- GBP/USD: 1.31 - 1.3235 ▲
- GBP/EUR: 1.10 - 1.1105 ▲
- GBP/AUD: 1.81 - 1.83 ▲
- GBP/NZD: 2.00 - 2.0175 ▲
- GBP/CAD: 1.7265 - 1.74 ▲