GBP Exchange Rates Find Footing Following Tuesday’s Losses
The Pound (GBP) is nursing its wounds this morning, following a slide late on Tuesday in reaction to UK lawmakers voting to reject an amendment to prevent a no-deal Brexit.
At the time of writing GBP/EUR is up roughly 0.3% from yesterday’s worst levels, while GBP/USD has broken back above $1.31
How did the Pound React to Tuesday’s Vote?
Pound Sterling (GBP) exchange rates fell immediately after Tuesday evening’s Brexit debate in the House of Commons which saw MPs back an amendment that ruled out the possibility of the UK leaving the EU without a deal.
MPs voted on a series of amendments in a debate on Theresa May’s Brexit ‘Plan B’ yesterday evening, but it was rejection of the amendment brought by Labour MP Yvette Cooper that was the main driving force behind Sterling’s losses yesterday.
Coopers amendment was designed to force the PM to extend Article 50 if a Brexit deal had not been agreed by MPs by the end of February, effectively preventing the possibility of the UK inadvertently crashing out of the EU without a deal.
MPs instead backed an amendment instructing Theresa May to return to Brussels and seek an alternative to the Irish border backstop, a sticking point on which the EU has repeatedly refused to budge.
Immediate response from Tusk – ' Withdrawal agreement is and remains the best and only way to ensure an orderly withdrawal of the United Kingdom from the European Union. The backstop is part of the Withdrawal Agreement, and the Withdrawal Agreement is not open for re-negotiation'
— Laura Kuenssberg (@bbclaurak) January 29, 2019
The Pound fell around a cent against the US Dollar (USD) and roughly half a cent against the Euro (EUR) following the debate amid rising Brexit uncertainty and renewed risks of a no-deal Brexit.
Despite these fears some analysts remain confident that Article 50 will ultimately be delayed, possible explaining Sterling’s resilience this morning.
Yukio Ishizuki, senior currency strategist at Daiwa Securities suggests:
‘It is difficult to tell what’s next for the pound. But the March 29 Brexit deadline will likely be extended, and the focal point is on when and how such an extension is decided upon.’
GBP Forecast: Renewed Brexit Uncertainty to Cloud BoE Outlook?
Looking ahead, the heightened uncertainty currently surrounding Brexit is likely to continue to hang over Pound (GBP) exchange rates for the foreseeable future, with the UK currency potentially becoming increasingly volatile as we near the 29 March leaving date.
However in the short-term this Brexit uncertainty is likely to confuse the outlook from the Bank of England (BoE).
The BoE will hold its first policy meeting of the year next week, with Sterling poised to slide if the uncertainty of the UK’s future outside the EU leads to some cautious forward guidance from the bank.
In the meantime the UK will also publish its latest PMI figures, with the latest snapshot of domestic growth providing GBP investors with the first indications of how the UK economy is faring at the start of 2019.
This may heap further pressure on the Pound if private sector activity is shown to have moderated again in January.