GBP/USD Reaches 8-Month Highs Amid Dollar Weakness, Brexit Deal Hopes

GBP/USD inched higher in early trading on Wednesday, reaching its highest levels since December 31st. The recent surge has been largely attributed to a soft US dollar and rising expectations that a Brexit trade deal will be reached by October.

On Tuesday, the US dollar index fell to a 27-month low while equity markets soared to record highs. Dollar weakness has been attributed to the Federal Reserve stimulus programs pumping massive liquidity into financial markets. The action of the Fed has boosted risk-assets to record highs and dampened demand for safe havens, including the US dollar.

Meanwhile, sterling has been underpinned by rising hopes that a Brexit trade deal can be made as early as September. A Downing Street spokesman said: “There are many issues that will be discussed during this week’s round, not least level-playing field, fisheries, trading goods and services amongst others.” He claimed that UK negotiators would “continue to plug the gaps where any differences remain” when talks enter their seventh round in Brussels on Wednesday. He added: “Our assessment is that a deal can still be reached in September.” On Tuesday, a European Commission spokesman warned that a deal would need to be agreed by October “at the latest”.

The latest statistics from Johns Hopkins University indicate that global confirmed cases of COVID-19 have risen to 22,148,472, with 781,139 deaths. On Wednesday, Prime Minister Scott Morrison said that Australia has ordered 25 million doses of Oxford University’s potential COVID-19 vaccine. He added that: “under the deal, every single Australian will be able to receive the University of Oxford COVID-19 vaccine for free, should trials prove successful, safe and effective.”

Looking at the GBP/USD daily chart we can see that price has made fresh highs for 2020. Trendline support lies below and bulls now eye the 1.3525 level from December 13 2019.