Pound US dollar exchange rate: GBP rises as Juncker reassures on post-Brexit status
The rise follows a statement from European Commission President Jean-Claude Juncker.
He said: “We respect the British decision to leave our union. But we also ask the British government to understand that someone who leaves the union cannot be in the same privileged position as a member state.
“After 29 March 2019, the UK will never be an ordinary third country for us. [However, the] UK will always be a very close neighbour and partner.”
The first part of this statement, and Mr Juncker’s later declaration that the UK will definitively be leaving the EU single market, suggests potential problems for future Brexit negotiations.
More positively, however, Mr Juncker’s ‘close neighbour’ remark implied that the bloc will still look to maintain ties with the UK after Brexit, which could mitigate the effects of even a hard-Brexit deal – hence the GBP/USD rise.
On the other side of the pairing, the US dollar has fallen against the pound and is trading tightly against other currency peers due to political developments.
In a sign that US trade tariffs could drive other global superpowers into closer union, Chinese President Xi Jinping and Russian President Vladimir Putin have recently met at the Eastern Economic Forum in Vladivostok.
The two leaders have indirectly snubbed the US by criticising its protectionist trade policies, sparking concerns that the US losing its relevance as other major nations boost ties between themselves.
The pound US dollar exchange rate could next be influenced by this afternoon’s speeches from Federal Reserve policymakers James Bullard and Lael Brainard.
Only Ms Brainard is voting on Fed interest rate decisions this year, but both officials could cause US dollar movement with their statements.
US dollar traders will be looking for any signs that there could be two more interest rate hikes in 2018, following the two seen earlier this year.
If both policymakers seem open to higher interest rates then the US dollar could rise sharply against the pound.
Beyond today’s Fed speeches, UK events will be back in the spotlight on Thursday with the Bank of England (BoE) meeting at noon.
Like the Fed policymakers, BoE officials could inspire a Sterling rise if they hint at a further UK interest rate hike coming in 2019.
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