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Pound v US dollar: Exchange rate surges to near August high on Barnier’s Brexit boost


It has climbed about a cent and a half so far this week thanks to positive Brexit developments, and at the time of writing was trending near those best levels.

M Barnier yesterday took an unexpectedly optimistic view on how UK-EU negotiations may unfold, saying: “We are prepared to offer Britain a partnership such as there never has been with any other third country.”

The indication that Britain could be given a deal that keeps it closer to the EU than any other non-EU country excited investors, who flocked to the pound en masse following his comments.

Investors and analysts hadn’t expected any major Brexit developments this week besides a testimony to the House of Lords from UK Brexit Minister Dominic Raab. As a result, M Barnier’s comments were a surprise to markets.

In fact, according to Viraj Patel, Foreign Exchange Strategist at ING, most analysts thought such a close deal was unlikely to be possible, saying: “This is something that most hadn’t thought was possible and may trigger a partial reassessment of no-deal Brexit risks that lends support to a politically-infested pound.”

M Barnier’s comments followed shortly after separate comments from Mr Raab in the House of Lords.

Mr Raab said that he was confident a UK-EU deal would be reached, even if the vague October deadline was not met.

Following weeks of “no deal” Brexit fears, hopes that a strong post-Brexit relationship between the UK and EU was possible left the pound far more appealing and it easily climbed against the US dollar.

Some investors bought the US dollar from its recent lows as markets digested news of a US-Mexico trade deal, and as this week’s US Gross Domestic Product (GDP) growth projections impressed investors.

If markets remain optimistic about the chances of a strong UK-EU Brexit deal, the pound to US dollar exchange rate could continue its recovery in the coming days. GBP/USD is on track to sustain a gain of over a cent this week.

Investors will also be paying close attention to US Personal Consumption Expenditure (PCE) price data later today, as well as UK consumer confidence and the US Michigan consumer confidence data on Friday.



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