Pound V US dollar: GBP/USD near 10-month high as Brexit talks resume

With no direct economic data to refer to yet, traders have instead been focusing on the ongoing Brexit talks in Brussels.

Last week the pound was lifted by the Government’s acceptance of the fact that it will need to pay an EU exit bill. 

Reports published so far this week, however, have been slightly less positive. 

For example, a report published by three UK universities has argued that the country could face food insecurity after Brexit. Composed by experts in food policy, the report argues that the UK could face higher prices and less import consistency after Brexit.

One of the report’s authors, Tim Lang, has stated that the government is not giving food supplies enough consideration during negotiations:

“With the Brexit deadline in 20 months, this is a serious policy failure on an unprecedented scale”.

Another author of the report, Professor Erik Millstone, has emphasised the lack of attention given to food:

“We are surprised at the failure of the government to address a huge set of issues related to food and agriculture. They give the impression of sort of sleepwalking into this”.

In essence, the report predicts that the UK may suffer from reduced food standards and a shortage of agricultural workers to collect produce after Brexit.

On a more positive note, Brexit Secretary David Davis is returning to Brussels for the second round of talks.

Laying out his intentions, Davis has stated that he wishes to ‘lift the uncertainty’ for EU citizens in the UK and vice versa.

This is a highly contentious issue for EU negotiators, so if a breakthrough is made then the rest of Brexit talks could go much more smoothly.

The pound could advance against the US dollar on Tuesday when UK inflation figures are published. The stats are predicted to show a 2.9 per cent level of inflation on the year in June but a slowdown from 0.3 per cent to 0.2 per cent on the month.

If inflation does hit 2.9 per cent, the pound may appreciate as it would keep the pressure on the Bank of England (BofE) to raise UK interest rates.

Last Friday saw US retail sales and consumer confidence fall, as well as a slowdown in annual inflation.

These reports reduced the odds of the Federal Reserve increasing interest rates for a third time in 2017, driving the US dollar lower in the process. 

Today’s most important US news will be the New York manufacturing index. The ‘Empire State’ is expected to report a slowdown in activity, which could help keep GBP/USD elevated. 

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Daily Express :: City and Business Feed

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