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Pound to US Dollar (GBP/USD) Exchange Rate Drops -0.3% Today after Post-Brexit Customs Union Rejected

Published: 17 May at 4 PM Tags: Pound Sterling, Euro Exchange Rate, Dollar Exchange Rate, Currency Exchange, Euro Crisis, UK, Exchange Rates, Inflation, Pound Dollar Exchange Rate,

Fading Hopes for UK Customs Union Membership Trigger Pound to US Dollar (GBP/USD) Exchange Rate Decline

Today has been relatively quiet in terms of UK economic data, so the Pound to US Dollar (GBP/USD) exchange rate has instead been affected by Brexit news.

Wednesday’s session of Prime Minister’s Questions brought hopes that the UK might be able to remain in the EU customs union after Brexit, based on direct remarks from PM Theresa May.

Since then, however, Mrs May has categorically rejected the UK remaining in the EU customs union:

‘We are not [climbing down]. The United Kingdom will be leaving the customs union, we are leaving the European Union.’

The PM’s firm rejection of continued customs union membership has been a blow to GBP traders, as it once again raises the risks of a less economically stable ‘Hard Brexit’ scenario.

Looking ahead to the coming week, there could be further Pound to US Dollar exchange rate losses on Wednesday when UK inflation rate data comes out.

The rate of price growth in the UK is predicted to accelerate, with higher costs anticipated for April’s month-on-month and year-on-year readings.

Rising inflation could spark concerns that UK consumers will face another wage squeeze, so there is a risk of the Pound to US Dollar exchange rate (GBP/USD) falling on the news.

US Dollar to Pound Exchange Rate Advances on $100 Crude Oil Forecasts

The US Dollar (USD) has risen in value against the Pound (GBP) today, following highly bullish forecasts for future crude oil prices.

Crude oil costs started rising last week, when US President Donald Trump announced that the US would be pulling out of the Iran nuclear deal.

This had an immediate effect on commodity markets – the price of oil rose sharply over fears that sanctions and Middle Eastern conflicts will reduce the available oil supply.

Since then the cost of the commodity has continued to rise; the latest price has been around $71 per barrel. Higher prices benefit US oil producers and exporters, as they enable more favourable transactions when selling overseas.

Predicting that oil prices could continue to grow, City Index Senior Market Analyst Fiona Cincotta has said:

‘Could oil go higher? If the US can get China to loosen energy ties with Iran, then regardless of increased US shale production, the price could close in on $100.’

There are concerns that higher oil prices could cause problems for US citizens who drive, as higher oil costs also mean that fuel is more expensive.

Apart from a number of Federal Reserve speeches over today and Friday, the US Dollar could next be supported by further growth in the price of crude oil.