Pound Sterling to US Dollar (GBP/USD) Exchange Rate Recoups Losses and Firms After Parliamentary Brexit Vote

Pound to US Dollar (GBP/USD) Exchange Rate Avoids Losses despite Sturdier US Dollar

A brief plunge following the UK Parliament Brexit vote last night, but was short-lived, and this morning saw the Pound Sterling to US Dollar (GBP/USD) exchange rate trending above the week’s opening levels again.

Weakness in the US Dollar (USD) made it easier for GBP/USD to jump by over a cent last week.

GBP/USD briefly dipped over a cent amid last night’s parliamentary vote, but at the time of writing the pair had recovered most of its losses and was trending higher.

Despite the government facing a significant defeat and having its long-negotiated Brexit deal broadly rejected by Parliament, the Pound (GBP) firmed today.

This was due to market hopes that MPs would strongly oppose a no-deal Brexit outcome, as well as hopes that a general election would be avoided.

Pound (GBP) Exchange Rates Firm despite Broad Brexit Uncertainties

As was widely expected, the government’s Brexit deal was blocked by Parliament during an anticipated vote on Tuesday evening.

However, investors were surprised by just how significant the loss was. A majority of over 200 voted against the government, making it the biggest government defeat in the history of the House of Commons.

In total, 432 MPs voted against the deal and only 202 voted in favour of it. The majority of 230 was higher than the number of MPs supporting the deal.

In the aftermath of the vote, the opposition Labour Party tabled a motion of no-confidence in the government, in the hopes it would succeed and force a general election.

As the government is expected to survive the confidence vote and Parliament generally seems strongly opposed to the possibility of a no-deal Brexit, the biggest downside risks to the UK economic outlook currently appeared to be lighter.

This made the Pound more appealing today and helped the British currency to hold its ground against a firm US Dollar (USD).

US Dollar (USD) Exchange Rates Avoid Further Losses as Currency Selloff Slows

Investors briefly piled into the safe haven US Dollar (USD) yesterday evening, amid uncertainty over how the result of the Brexit vote would unfold.

However, the Pound to US Dollar (GBP/USD) exchange rate quickly recovered and has remained persistently sturdy since then.

Still, the Pound (GBP) was prevented from further gains, as investors also firmed on the US Dollar.

The safe haven currency may have lost some of its shine so far in 2019, with US-China trade negotiations seeing progress and Federal Reserve interest rate hike bets falling, but the currency remains appealing in times of market uncertainty.

The US Dollar’s selloff on the back of a more dovish Federal Reserve has also slowed, as markets have now largely priced in frozen monetary policy from the Fed for this year.

Pound to US Dollar (GBP/USD) Exchange Rate Traders await Brexit News, US Data

For the time being, the Pound to US Dollar (GBP/USD) is trending just above the week’s opening levels as investors anticipate news about the next steps in the Brexit process.

Far from confirming how the Brexit process will unfold, last night’s vote threw the process into deeper uncertainty. The government is now under pressure to put an alternative solution forward to MPs.

Pound (GBP) investors are hopeful that a general election can be avoided and that MPs will work to avoid a no-deal Brexit becoming reality. This is keeping the Pound afloat.

If the next step in the Brexit process involves creating a ‘softer’ Brexit to please more MPs, or even a second referendum of some kind, the Pound may be in for further gains. Until there are more developments, Sterling’s movement will be limited.

US data due in the coming sessions could still influence GBP/USD however. Philadelphia Fed’s January manufacturing index will be published tomorrow, with US industrial production and Michigan’s consumer confidence stats due on Friday.

Of course, any surprising developments in US-China trade developments or the US government shutdown may also influence the Pound to US Dollar (GBP/USD) exchange rate in the coming days.

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