Post-Brexit Deal Promise Helps Boost Pound

Alan Penny

5 June 2019

2 min read

This week’s state visit of President Trump to the UK has brought with it some positive movements for the GBP. The pair hit levels of $1.27 through the course of the day. This was partly due to a weakened dollar, but also on news of a potential trade deal with the UK. The President was very bullish on the prospect of an excellent trade deal in the post-Brexit period.

Trump Killing Them With Kindness

The markets have responded well, at least in the short-term, to the very complimentary approach that President Trump has adopted toward the UK and the post-brexit trade environment. This is particularly noticeable during the current time of difficulty for Theresa May and her government.

This is a positive tone that has not been uncommon during the current administration. Similarly flattering rhetoric was used on other overseas trips by Trump. These kind words may have yielded little other than criticism at home for the President, though he will argue that such an approach has been invaluable in boosting the US economy since he took office.

Many trade partners, particularly in the EU, are shying away from making declarations of loyalty or trade deals with the UK at this present moment. It is possible that the US administration sees this as an opportunity to strengthen an alliance which has always been reasonably iron-clad. This is a necessity for both given the current environment with the ongoing US-China trade war, and Brexit debacle.

What’s Next for GBP and the UK?

The visit and subsequently positive outlook for trade relations have certainly been a boost for both the UK and the pound. This is likely to be of a short-term nature at the moment though. More eyes remain fixed on the race to become the next leader of the UK. The outcome of this race should prove to be a more significant influence on the future of the currency.

The US Dollar action could lead to a further strengthening of the GBP. With continuingly resolute stances on issues with China and Iran in particular, the currency could have some way to slide without resolutions in the coming weeks. This may, in turn, provide something of a false positive for the pound.

EUR/USD Also Rallies

Not to be outdone by the GBP, the EUR/USD also rallied well on Wednesday. The pair moved toward 1.13 today, though settled on a close of 1.1227. This has largely come off the back of the Federal Reserve hinting at a move toward easing the monetary policy. This would be a move which ultimately works against the value of the US Dollar.

Within the coming days and weeks, any positive news coming from the EU could further push the market substantially higher than the current position. This is something which many analysts have alluded to, particularly if the 1.13 level is passed by. This should be of some help in boosting US exports within the EU area as purchasing power increases.

Written By
Alan Penny

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