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Sterling Rallies, Dollar Retains Coveted Status

Currency Converter Calculator’s Forex News Roundups aim to help traders and Forex enthusiasts stay up to date with the latest happenings and analysis in the global currency exchange market, with a focus on major currency pairs and a few Emerging Market (EM) currencies.

In this edition, we take a look at how the Great British Pound (GBP) and the US Dollar (USD) have been performing so far this week.

Sterling Rallies On Brexit Talks Progress

The British Pound had a good start to the week, with politicians having a more positive tone on Brexit negotiations with the European Union (EU) causing it to jump against many of its main rivals on Monday. 

Specifically, it appreciated by over one percent against the US Dollar and by a similar amount against the Euro (EUR).

The gains haven’t solely been attributed to progress in Brexit negotiations, with Forex analysts pointing out that comments from a Bank of England (BoE) official against the use of negative interest rates also benefitted the Sterling. 

It was Sir Dave Ramsden, the BoE’s deputy governor, who recently said that the UK’s central bank was “not about to use negative interest rates imminently” in a bid to bolster the economy. 

Countless central banks all over the world have slashed interest rates over the course of the COVID-19 pandemic, as they looked to discourage saving and make borrowing more affordable to stimulate spending in the economy and reduce the risk of a coronavirus-induced recession. 

USD is Still the World’s Reserve Currency of Choice

The US Dollar has held its position as the global reserve currency of choice despite it falling by close to ten percent in a matter of months, according to Oxford Economics, a leading British forecasting firm.

Adam Slater, Oxford Economics’ lead economist, said: “There have been quite a lot of Dollar corrections over the last 20 years or so, and it seems like almost every time this happens we get the same stories asking if this could be the beginning of the end of the Dollar.”

Continuing, he stressed that a weaker Dollar actually leads to greater demand for the Greenback, so if anything, its position as the global reserve currency of choice has been cemented by the pandemic. 

With the pandemic still causing lots of global economic uncertainty, we can expect to see more inflows towards the Dollar and other safe-haven assets over the coming months.

A Quick Summary

  • The Great British Pound had a good start to the week, with progress in Brexit negotiations causing it to appreciate against the Euro and the Greenback.
  • The Bank of England’s confirmation that it won’t make further cuts to interest rates in the near future also boded well for Sterling.
  • Meanwhile, Oxford Economics affirmed the US Dollar’s position as the reserve currency of choice despite it falling by close to ten percent over the course of the COVID-19 pandemic. 
  • More inflows towards the USD are expected over the coming months, with the global economy struggling to get out of the coronavirus-induced recession.