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Pound (GBP) Rises on Hopes of Brexit Deal

Published: 19 Oct at 4 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, China,

Pound (GBP)

The Pound (GBP) rose against many of its peers today on growing hopes that a post-Brexit trade deal between the UK and the EU is altogether possible, despite Prime Minister Boris Johnson’s hints that he would prefer an Australia-style Brexit.

The European Commission’s vice president Marco Sefcovic commented:

‘It has to be a fair agreement for both sides – we are not going to sign an agreement at any cost. The European Union is ready to work until the last minute for a good agreement for both parties.’

As a result, Sterling has performed strongly against the Euro and US Dollar, with UK markets more hopeful that Downing Street and Brussels could show a last-minute compromise on a Brexit deal.

Euro (EUR)

The Euro (EUR) suffered today after safe-haven assets were shunned in favour of riskier assets following news that China is the first large economy to have made a rebound from the Covid-19 pandemic.

China’s central bank governor, Yi Gag, said on Sunday:

‘The Chinese economy remains resilient with great potential. Continued recovery is anticipated, which will benefit the global recovery.’

Meanwhile, the European Central Bank’s (ECB) President, Christine Lagarde, warned that the Eurozone’s economy could risk ‘losing momentum’ amid a second-wave of the coronavirus.

US Dollar (USD)

The US Dollar (USD) also suffered from a slip in safe-haven demand today, with China – the world’s second-largest economy – showing an economic rebound, with many investors expecting it to be the only G20 economy to grow this year.

However, the ‘Greenback’ has continued to benefit from American political uncertainty ahead of November’s presidential election.

Additionally, Nancy Pelosi, the US House Democrat leader, said she was ‘optimistic’ about a Covid-19 stimulus deal ahead of November’s election.

Consequently, this has weakened demand for the US Dollar as investors seek out riskier assets.

Canadian Dollar (CAD)

The Canadian Dollar (CAD) strengthened today owing to renewed hopes of a US stimulus package, which would boost confidence in the risk-averse ‘Loonie’.

Analysts at Reuters commented:

‘The Canadian dollar gained ground against its broadly weaker U.S. counterpart on Monday, as investors grew more hopeful of a pre-election U.S. stimulus package and domestic data showed wholesale sales rising for the fourth straight month.’

Australian Dollar (AUD)

The Australian Dollar (AUD) has remained under pressure despite growing confidence in the Chinese economy. With China being Australia’s biggest trading partner, the recent positive Chinese economy data bodes well for Australia’s economy.

However, with growing concerns over the global Covid-19 pandemic and US political uncertainty, ‘Aussie’ investors have remained notably cautious today.

New Zealand Dollar (NZD)

The New Zealand Dollar (NZD) also suffered from rising uncertainty over the global Covid-19 situation and political uncertainties both in Europe, the UK, and the US.

As a result, investors have begun to shun the ‘Kiwi’ after the currency’s boost from Jacinda Ardern’s election win.

As of Monday, 19th October 2020, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1002, GBP USD exchange rate was 1.2948, GBP AUD exchange rate was 1.8328, GBP NZD exchange rate was 1.9623, GBP CAD exchange rate was 1.7077, and GBP CNY exchange rate was 8.6517.
Dominic Lee About Author: (474 Posts)With over ten years experience as an economist – including four years spent as a chief economist with a major currency broker – Dominic has acquired a wealth of knowledge which he uses to forecast market movements. Dominic now works as an independent business advisor and writes for several financial publications.

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