GBP to USD Is Reversing Course
The GBP to USD pair, also called the “cable,” has moved above 1.46 after a sudden boost took over the currency pair on Wednesday in favor of the British pound. The unexpected rise continued on Thursday, which suggests we are witnessing a veritable shift in trend. The proof came as the GBPUSD rose above the 1.46 support base.
Indeed, the GBPUSD could spill over the recent resistance level of 1.49 into 1.50 or higher. The reason for the shift is a sudden wave of euro-optimism spilling over from the Brexit debate. The anti-Brexit party seems to have infused optimism and intensified the momentum in favor of Britons staying in the European Union (EU).
The pound-dollar exchange rate had experienced high volatility due to the Brexit uncertainty. The cable swung in various directions in accordance to what the polls and the pundits said about the prospects of a Brexit. Yet the final push in favor of the British pound came as the Federal Reserve chose to stay the course after Thursday’s Federal Open Market Committee (FOMC) meeting. The lack of any interest rate support for the dollar from the Fed only served to accentuate the bullish trend in favor of the pound.
The fact that the GBP has begun to rise against the USD, despite recent negative data for salaries and retail sales from the British economy, shows just how influential the Brexit referendum has been. Given this relationship, the pound-dollar exchange rate will continue moving upward for the pound.
The growing evidence that a Brexit will not happen has turned fear for the future of the British economy into unabashed confidence. The prospect of a Brexit was clearly what had dragged down the value of the pound to a series of lows against the dollar since the start of 2016. The GBP to USD went as low as 1.38, finding stability around the 1.40 mark.
However, polls have given the anti-Brexit party, championed by Prime Minister Cameron himself, a clear advantage. The poorer economic data has played no small role in reversing British citizens’ hearts and minds over a potential Brexit. Britons have interpreted the signs of slower growth as deriving from the Brexit risk. Now, voters in the U.K. are more susceptible to the barrage of negative scenarios that economists and politicians have prognosticated.
President Obama, who recently visited London, expressing support for the anti-Brexit camp, gave the GBP a final big push. He said that the U.K., while a historic and special U.S. partner, would have to renegotiate major trade advantages it currently enjoys as a member of the EU if it voted in favor of a Brexit.