Pound Sterling to US Dollar Exchange Rate Plummets on UK Minister Resignations

Pound to US Dollar Exchange Rate Hit by Mounting Fears of UK Political Instability

UPDATE: While the UK and EU did finally confirm that an emergency Brexit summit would take place on 25 November to finalise the negotiated deal, the Pound Sterling to US Dollar (GBP/USD) exchange rate has continued to plummet today.

GBP/USD slumped over a cent, with investors selling the Brexit-battered Pound (GBP) en masse in reaction to a chain of resignations within the UK government.

Brexit Secretary Dominic Raab resigned in the morning in protest at Theresa May’s Brexit plan. His resignation was followed by others.

On top of this, MPs have begun to hand in letters of no-confidence in Theresa May’s leadership. If 48 letters are gathered, a no-confidence vote will be activated. UK political fears have flared up while Brexit uncertainty was already high.

Pound to US Dollar Exchange Rate Fails to Benefit from Brexit News

UPDATE: While a UK-EU Brexit deal is now seemingly closer to becoming reality, the Pound Sterling to US Dollar (GBP/USD) exchange rate was unable to hold its ground on Wednesday as major uncertainties persisted.

Concerns that Parliament could block any Brexit bill due to a lack of support persisted, as Prime Minister Theresa May’s cabinet had a mixed reaction to the Brexit draft text.

Wednesday’s US inflation results largely met forecasts, so demand for the US Dollar (USD) was little changed and this left Brexit news the primary cause of GBP/USD movement.

Theresa May will deliver a statement to MPs on Thursday, and an emergency EU summit is expected to be held on 25 of November to finalise the deal.

Pound to US Dollar Exchange Rate Investors Brushed Over UK Data with Brexit Jitters in Focus

UPDATE: The Pound to US Dollar (GBP/USD) exchange rate continued to slip throughout Wednesday morning as investors became more anxious ahead of an anticipated UK cabinet meeting.

Some UK ministers have criticised UK Prime Minister Theresa May’s Brexit plan and there are concerns that the bill’s support may ultimately be weak even before heading to Parliament.

As a result of the focus on Brexit news, investors brushed over the morning’s UK inflation rate data.

UK inflation was slower in both prints than forecast, which certainly wouldn’t have made the Pound more appealing regardless.

Pound to US Dollar (GBP/USD) Exchange Rate Fails to Advance despite Brexit Deal

News that the UK and EU had finally written up the draft of a Brexit deal gave the Pound to US Dollar (GBP/USD) a brief boost overnight, but concerns about potential domestic opposition to the bill limited Sterling’s (GBP) appeal.

Despite broad fluctuations on Brexit uncertainty, GBP/USD has actually made little notable movement this month so far.

GBP/USD was trending around a cent lower earlier in the week, but overnight briefly reached above the week’s opening levels.

At the time of writing on Wednesday morning, GBP/USD was trending near the week’s opening levels – a level close to the ones seen at the beginning of November.

Investors have been hesitant to back the Pound despite a UK-EU Brexit deal having been finally written up, amid concerns that such a bill could be stopped short by UK Parliament.

Sterling has been able to sustain most of its Tuesday recovery however, as investors have recently sold the US Dollar (USD) from its highs during a spell of profit taking.

Pound (GBP) Exchange Rates Struggle amid Brexit Bill Uncertainty

With the UK and EU having written up an agreement on Brexit, Theresa May is set to present the draft to her Cabinet later today.

If things go well, the UK and EU may be set to hold an emergency Brexit summit before the end of the month. However, if ministers disagree or even resign in response to the bill, the bill’s path forward will be even tougher.

Sterling is volatile as investors await the Cabinet meeting. With Brexit news such a heavy focus today, UK data has had a minimal impact on the Pound’s outlook.

Britain’s October inflation rate fell short of forecast on Wednesday, but the data had little impact on Sterling with the upcoming Brexit meeting so hotly anticipated.

US Dollar (USD) Exchange Rates Sold from Highs Following Bullish Week

While the US economic and monetary policy outlooks are still strong, the US Dollar (USD) fell back from its best levels on Tuesday.

The US Dollar is a safe haven currency that has benefitted from political uncertainties and perceived monetary policy divergence among major economies.

Analysts note that the US Dollar’s selloff is unlikely to last and is only due to the strength of rivals more than US Dollar weakness. According to Kathy Lien from BK Asset Management:

‘Don’t be fooled by the pullback in the US Dollar … nearly all of the major currencies rebounded because of local factors and not a shift in appetite for US Dollars or change in economic fundamentals.’

Pound to US Dollar (GBP/USD) Exchange Rate to React to Outcome of Brexit Meeting

The Pound to US Dollar (GBP/USD) exchange rate will likely spend much of Wednesday’s session in limbo as investors hotly anticipate the afternoon’s cabinet meeting.

An agreement within the cabinet would send Sterling (GBP) surging on hopes that a Brexit summit will be held soon, while disagreement or mass resignations would cause Sterling to plunge.

The US Dollar (USD) may find it easier to firm against a volatile Pound if upcoming US Consumer Price Index (CPI) data impresses investors.

Stronger-than-expected US inflation could boost Federal Reserve interest rate hike bets and leave the US Dollar’s strength more resilient. It would be unlikely to knock the Pound to US Dollar (GBP/USD) exchange rate lower if the Brexit bill progresses, however.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard