Forex

Pound Sterling on a Positive Trajectory on the Back of Positive Brexit Reports

The British Pound continues to hold strong against major currencies as the market digests recent developments in the context of Brexit. On Thursday 10, 2019, the GBP climbed 2.2% against the US dollar to $1.247. Versus the Euro, the Pound Sterling gained 1.14% resting at 1.1241.

Source: XE.COM

Brexit continues to weigh heavy on GBP performance

On Thursday, UK Prime Minister Boris Johnson met with Leo Varadkar, the Irish Taoiseach. The leaders held talks over Brexit for over two hours and agreed that there is a “pathway to a possible deal.” After the 10 Downing Street meeting, Mr. Varadkar offered a positive outlook as far as a Brexit deal is concerned. According to Mr. Varadkar, the meeting was “sufficient to allow negotiations to resume in Brussels.”

Whether it is the result of the Varadkar-Johnson meeting or not, UK’s Brexit Secretary and the EU’s chief negotiator will meet on Friday. Top on the agenda for the meeting will be an orderly Brexit. This is a positive development considering that the EU will meet on October 17 through 18 to mull on the Brexit issue. For once, there is optimism in the currency markets that a hard Brexit might be unlikely.

What is clear from the developments is that the market thinks Brexit is a major determinant of the GBP’s exchange rate. A hard Brexit would further muddy the prospects of an exchange rate that is already badly affected. According to Jane Foley, a currency analyst at Rabobank, the GBP/EUR exchange rate is likely to oscillate around the current levels for over the next 90 days. Certainly, this move will “frustrate those looking for material changes in value of either Sterling or the Euro.”

US-China trade war to upset the GBP/USD exchange rate

Over the last one week (especially after the Varadkar-Johnson meeting), the GBP gained against all major rivals. The Pound Sterling gained 0.62% against the Euro, 0.74% against the Canadian dollar, 0.96% against the greenback, and 1.97% against the Japanese yen.

Nonetheless, the GBP/USD pair will be the most fascinating to watch given the events surrounding the US-China trade war. To be sure, the likelihood of a meaningful resolution to the trade war is fading away by the day. Particularly, the US President Donald Trump has made it clear that he will “not agree to a partial agreement.” As such, China is likely to face another round of tariffs from Trump’s White House. Eventually, the USD might further underperform against the GBP going forward, despite the unfolding Brexit drama.

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Ruchi Gupta

Ruchi Gupta covers various beats from finance to technology and from lifestyle to hobbies. She has an MBA in Finance. Ruchi enjoys writing on celebrities and political news. She likes traveling and exploring places.

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