Pound v US dollar: GBP rises amid highly optimistic post-Brexit economy forecast
THE pound has risen by 0.4 per cent against the US dollar today, following a highly optimistic forecast about the post-Brexit UK economy.
Expert: Pound reaches post-Brexit HIGH against dollar
The GBP/USD exchange rate has been in the region of $1.390, which is almost the best pairing rate since the EU referendum in 2016.
In addition to advancing against the US dollar, the pound has also made similar-sized gains against the Australian dollar and the Japanese yen.
In an outlook that has raised trader confidence, former Treasury Minister, Lord Jim O’Neill, has estimated that the UK economy might recover quickly from Brexit.
Mr O’Neill has gone so far as to state that the UK’s impending growth boom could ‘dwarf’ any losses from Brexit.
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He said: “Some parts of the country, led by the North West [of England], are actually doing way better than people seem to realise or appreciate.
"As well as this crucial fact, the rest of the world is also doing way better than many people would have thought a year ago, so it makes it easier for the UK.”
Building on this optimism, Lord O’Neill also said: “Maybe this [better global growth] means the [UK’s] going to be able to cope with Brexit better than certainly somebody like me might have thought some time ago.
"But I would quickly add at the same time, I have felt for a good couple of years, as important as Brexit is, it isn't the most important thing facing Britain's future."
The rest of the world is also doing way better than many people would have thought a year ago
Mr O’Neill’s dismissal of Brexit concerns has done wonders for the pound’s value, as traders look forward to a possible economic revival in the coming months.
Over in the US, there is low confidence in the government, which has led to a devaluation of the US dollar.
The federal government is currently in a state of paralysis after a funding extension was rejected in the Senate on Sunday.
This means that hundreds of thousands of workers will not receive pay, and leaves key services either closed or operating on skeleton crews.
The shutdown was triggered by a majority of Democrats and small number of Republicans, due to a disagreement over funding for plans on both sides of the Senate.
The Bank of England explains the exchange rate
Looking ahead, Tuesday could see the pound could lose its current advantage against the US.
The UK borrowing deficit is expected to shrink when figures are released on Tuesday, but a forecast-matching drop in business optimism could end up devaluing the pound.
Sticking with the shutdown news in the US, there will be a vote this evening to try and break the deadlock.
If funding is restored, the US dollar could rally against the pound.
This largely depends on whether the two sides of the Senate can come to an agreement, which remains only a distant possibility at present.
