Pound us dollar exchange rate: GBP/USD dips as Downing Street threatens no deal Brexit

The Government’s 30-page document outlining its Brexit priorities stated: “[The UK] will not negotiate any arrangements in which the UK does not have control of its own laws and political life”. Sterling reacted negatively to the news, with investors now fearing that the UK could face a no-deal by the end of the transition period, which terminates at the end of December this year. 

Frances O’Grady, the General Secretary of the Trades Union Congress (TUC), was also critical of the Government’s strategy, commenting: “A good deal with the EU should be this government’s priority.”

“But instead [Prime Minister] Boris Johnson is gambling with people’s livelihoods by again threatening [an economically] disastrous no deal.”

Two new cases of coronavirus (Covid-19) in the UK have also weakened the GBP/USD exchange rate today. This has also increased concerns that March’s budget could be delayed, with the Covid-19 outbreak heightening uncertainty over the economic outlook. 

Neil Jones, an analyst at Mizuho Bank, comments: “My sense is the market is pulling back on [the pound’s] long positions originally destined to run into an upbeat expansionary fiscal stance in next month’s budget.”

“However, latest reports suggest measures may well be delayed into the autumn.”

The US dollar edged higher against a weaker Sterling today in spite of growing concerns over a rate cut from the Federal Reserve. 

Former Federal Reserve Chairwoman Janet Yellen said that the coronavirus could threaten a recession for the US economy.

Mrs Yellen commented: “We could see a significant impact on Europe, which has been weak to start with, and it’s just conceivable that it could throw the United States into a recession.”

US dollar investors will be awaiting today’s raft of US economic data. Any signs of improvement in the US GDP report for the fourth quarter would further buoy the greenback.

Looking ahead, we could see the pound continue to fall tomorrow, with February’s UK GfK consumer confidence report forecast to remain subdued at -8.

Source: Read Full Article