Pound US dollar exchange rate: GBP/USD dips as ‘Brexit fog’ continues to haunt UK economy
Although inflation moved closer to the Bank of England’s (BoE) target, Robert Alster, Head of Investment Services at Close Brother Asset Management, was downbeat in his analysis, commenting: “[D]espite this greater economic optimism, the UK is not yet out of the Brexit fog and the 31 December cliff-edge is only getting closer.”
“The Bank of England [BoE] will be trepidatious about bold monetary decisions until the scale of this post-EU disruption is known.”
Sterling also struggled after the EU’s Chief Negotiator Michel Barnier dashed Downing Street’s hopes of a Canada-style trade deal.
Mr Barnier said a UK-EU trade deal was a “different ball game”, while the UK’s Chief Brexit Negotiator, David Frost, has also recently insisted that the UK would not align with EU rules in a post-Brexit trade deal.
The threat of a possible no-deal following the termination of the transition period later this year is leaving investors wary of GBP.
The US dollar, meanwhile, benefited from today’s better-than-expected US construction data, with building permits hitting a 13-year high at 1.551 million in January.
The “greenback” also remains in demand due to its safe-haven status as the coronavirus leaves markets jittery over a near-term global economic slowdown.
The next shift in the GBP/USD exchange rate could be caused by the Federal Open Market Committee’s policy meeting minutes.
Any bullish comments from the Federal Reserve about the American economy could prove USD-positive.
Looking ahead to tomorrow, we could see the pound head higher if January’s UK retail sales report confirms forecasts and rises from -0.6 percent to 0.7 percent in January.
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