- Brexit Negotiations
- Pound Resilience
- Dollar Weakness on Riots
GBP/USD rallied in early Wednesday session, touching levels last seen at the start of March before COVID-19 pandemic started causing havoc in the U.K. A 0.4% plus rally came at the backdrop of a weakened U.S dollar that has taken a significant hit in recent sessions.
The Pound continued to strengthen against the dollar and other currencies, as investors continued to bet on the fourth round of talks between the U.K and the EU. The markets expect a trade deal before the end of the month. Optimism about the BREXIT negotiations is one of the developments that continue to support the British Pound in the currency market.
Reports that the U.K is willing to compromise to avoid a no Brexit deal that would be catastrophic have continued to build traders’ sentiments around the Pound. In addition, the Pound has remained resilient in recent weeks as a no-deal outcome appears to be priced.
The GBP/USD has also risen to three months highs on the greenback coming under pressure amidst growing tension in the U.S. Continued riots against police brutality could weigh in on the U.S economy that is yet to bounce back from the COVID-19 pandemic.
Traders becoming optimistic about a bounce-back of the global economy following the COVID-19 pandemic have seen an inflow of cash into riskier assets in recent weeks. Similarly, the greenback has continued to weaken after rising past the $100 barrier, given its safety-haven attributes. A weakened dollar should help support an upswing GBP/USD exchange rate.
Looking ahead, the Composite PMI and Service PMI Data are some of the immediate economic data that will help shed more light on the U.K economy. Depending on how the data comes out, they will greatly influence the direction the pair moves. For the Composite PMI, traders expect it to remain intact at 28.9 with the Services PMI expected to improve slightly to 28 from 27.8.