GBP/USD Soars to Highest Level Since Brexit Referendum

GBP/USD Soars to Highest Level Since Brexit Referendum

The Pound soared on Friday to attain the highest level since the Brexit referendum as reports hit the market that some European nations, such as Spain and the Netherlands, would be accepting of a softer Brexit.

The Pound reached almost $1.37 against the US Dollar (GBP/USD) on the news. Sterling slipped to $1.20 following the Brexit vote, but regained some ground in 2017. Sterling has been higher across the board today, climbing by around 1.0% against the New Zealand Dollar, South African Rand, Japanese Yen, US Dollar, Australian Dollar, Hong Kong Dollar, and Canadian Dollar.

The Euro also reached a three-year high versus the US Dollar (EUR/USD) on account of progress with German coalition talks. Angela Merkel looks as if she’s on target to remain in power after a stage of talks jumped over the first hurdle. Political stability is likely to bode well for the Euro exchange rate, while a snap election might offer populist parties more votes.

Meanwhile in the US, headline inflation inched up by only 0.1% in December, slightly below the 0.2% forecast. The annual rate fell slightly to 2.1%. However, the strong core inflation reading has led some to believe that the US Federal Reserve might be on course to hike interest rates again as low unemployment levels and strong growth numbers offer the possibility of higher consumer prices.

Barclays US Economist Michael Gapen commented:

‘We view the report, on balance, as helping to confirm FOMC members’ suspicions that disinflation from 2017 will likely prove transitory. Alongside a forecast of above-trend growth and a declining unemployment rate, today’s inflation data are consistent with our outlook for further normalisation of Fed policy. We expect four 25 basis-point rate increases in 2018 with the next hike coming at the March FOMC meeting.’

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