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Pound Rebounds Against US Dollar and Euro (GBPUSD, GBPEUR) on Brexit Glimmer

August 30, 2018 6:49 am | Modified September 4, 2018 8:55 am
GBP, USD | BY Ashleigh Fox

The Pound was offered the opportunity to climb against the Euro (GBP/EUR) and US Dollar (GBP/USD) on Wednesday after EU negotiator Michel Barnier suggested that the UK could get a good Brexit deal. Barnier said: ‘We are prepared to offer Britain a partnership such as there never has been with any other third country.’

As a result, the Pound to US Dollar exchange rate clambered across the 1.30 mark while the Pound to Euro (GBP/EUR) exchange rate rose above 1.11 and has remained in this region today.

Chief Economist at Global Reach, Eimear Daly commented:

‘Ahead of yesterday, the Pound was priced for a no-deal Brexit, the worst case scenario. Barnier’s comments brought a dose of reality to FX markets. The EU has a motive to reach an agreement with the UK and in the history of EU politics, an eleventh-hour agreement is usually reached. The Pound has traded at the mercy of negative Brexit headlines for too long. It is important to price the Pound for the base case outcome and not the tail risk.’

Meanwhile, in the US, pressure for the US and Canada to reach a trade deal are heating up. US President Donald Trump has set a deadline of Friday for the two countries to come to an agreement which would modernise the North American Free Trade Agreement (NAFTA) which has been in place for 24 years. Mexico and the US agreed on a bilateral deal on Monday, and now negotiations are trying to ensure Canada can be part of the agreement.

Trump said:

‘They (Canada) want to be part of the deal, and we have until Friday and I think we’re probably on track. We’ll see what happens, but in any event, things are working out very well.’

Canadian Prime Minister Justin Trudeau also commented, saying:

‘We recognise that there is a possibility of getting there by Friday, but it is only a possibility, because it will hinge on whether or not there is ultimately a good deal for Canada. No NAFTA deal is better than a bad NAFTA deal.’

An agreement between all three countries could help to boost the Dollar as months of uncertainty come to an end. The Canadian Dollar could also gain some favour as around 75% of its exports reach the US.

The Pound to Euro (GBP/EUR) exchange rate is trading at 1.1124. The Pound to US Dollar (GBP/USD) exchange rate is residing in the region of 1.3004.

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