The Pound to US Dollar (GBP/USD) and Pound to Euro (GBP/EUR) exchange rates were able to break through key psychological barriers overnight. GBP/USD rose to above 1.40 for the first time since Brexit, while the GBP/USD exchange rate reached a one-month high of 1.14.
Sterling’s gains against the US Dollar follow a bout of USD weakness, but in the past four sessions the British currency has risen by over 1.0% and has gained by over 3.0% since the start of the year. Before the Brexit referendum, GBP/USD was trading at levels of 1.50.
The Pound exchange rate has also been buoyed by positive sentiment around Brexit and a potential deal. French President Emmanuel Macron most recently gave the currency a boost when he suggested that the UK may be able to gain it’s ‘own solution’ to trade which spurred hopes of a special deal.
In other news, the International Monetary Fund (IMF) has downgraded the UK’s growth outlook in 2019, the year Britain leaves the EU. The IMF now believes growth will reach 1.5% rather than the 1.6% it estimated earlier, and left 2018’s forecast at 1.8%. By comparison, the IMF lifted 2019 projections for Germany, Canada, and the US.
In the rest of today, markets are awaiting the ZEW Economic Sentiment survey for the Eurozone, and Eurozone Consumer Confidence readings. Additionally, the World Economic Forum is starting in Davos today and comments there could have the potential to create market movement.
Later in the week, the European Central Bank (ECB) will be making its latest interest rate decision with a followup press conference on Wednesday, and Friday will see both the UK and the US release Gross Domestic Product (GDP) figures detailing economic growth in quarter four.
The US government shutdown has also come to an end as a deal was reached to extend funding until February 8th. Yesterday Republicans and Democrats voted for a temporary funding bill after it was agreed there would be a future debate over the fate of young illegal immigrants. However, a longer budget still doesn’t seem to be within reach.
GBP/USD is trading at 1.3950.
GBP/EUR is at levels of 1.1399.