Pound US Dollar (GBP/USD) Begins to Claw Back Losses after Devastating Cox Assessment of Brexit Deal

After Slumping Pound US Dollar (GBP/USD) Tries to Mount Recovery as Theresa May Speaks

UPDATE: Following the dramatic 1.7% slump this morning GBP/USD has eased a little and is currently down -0.8%, trading at an inter-bank rate of $1.3133.

This comes despite confirmation from the Northern Irish Democratic Unionist Party (DUP) saying that they would be unable to support Theresa May’s Brexit withdrawal agreement in a parliamentary vote tonight.

In addition to the DUP, the eurosceptic European Research Group (ERG) also confirmed that they would not support the deal, leaving it highly likely that the PM will be defeated.

Theresa May has now opened the debate ahead of tonight’s Brexit vote, with markets relaxing a little as they calculate the likely repercussions of the agreement failing to pass.

Pound US Dollar (GBP/USD) Nosedives 1.7% as UK Attorney General Geoffrey Cox Pours Cold Water on Theresa May’s EU Withdrawal Agreement

UPDATE: UK Attorney General Geoffrey Cox – the government’s chief legal adviser – has issued a statement detailing his legal advice on whether the changes secured by Theresa May to her Brexit withdrawal agreement were legally binding under international law.

Cox concluded that the UK would not unilaterally be able to put an end to the Irish backstop, with his advice likely to cause severe repercussions for this evening’s parliamentary vote.

Immediately after his advice was published the Pound suffered a broad based fall on the markets, with GBP/USD down sharply by 1.7%.

At the time of writing the Pound is trading at $1.3023 against the US Dollar on the inter-bank market..

Rumours that Tomorrow’s Brexit Vote Could be Altered Weigh on Pound to US Dollar Exchange Rate

UPDATE: Sterling’s (GBP) market volatility is worsening ahead of this week’s anticipated Brexit developments – which could be huge for the direction the process takes.The Pound Sterling to US Dollar (GBP/USD) exchange rate had dipped this morning on rumours that the UK government was planning to change or delay tomorrow’s meaningful Parliament vote on Brexit.

However, around midday the government attempted to play down speculation of the vote being postponed further and this helped GBP/USD to hold its ground

Pound to US Dollar (GBP/USD) Exchange Rate Slides as Brexit Talks Remain in Deadlock

Hopes that the UK government’s Brexit plan could become acceptable enough to pass through Parliament faded last week, and this led to a week of losses for the Pound Sterling to US Dollar (GBP/USD) exchange rate. Investors are now fully focused on tomorrow’s Brexit vote.

After opening last week at the interbank level of $1.32, GBP/USD tumbled for most of the week on fresh Brexit uncertainties. Following solid losses, GBP/USD ended the week almost two cents lower.

So far today, GBP/USD has been unable to avoid further falls. However, the pair did briefly touch its worst level in three weeks after having lost all of the gains seen in late February.

Pound (GBP) Unappealing Ahead of Parliament Brexit Vote

Tomorrow, the UK government is set to put its negotiated Brexit deal to Parliament vote once again – but it is widely speculated that support for the deal has not changed much since the previous attempt.

The UK government has sought renegotiation with the EU over the past month, but neither side has budged in talks and as a result the government’s Brexit deal has not seen any notable changes.

When the deal was first put to Parliament it suffered an overwhelming defeat. With no big changes since then, analysts are doubtful that it will succeed this time either.

Observers currently expect the deal will be blocked, but that Parliament will then go on to vote against a no-deal Brexit and vote in favour of the process being delayed over the coming week.

As investors still hope a no-deal Brexit can be avoided, the Pound (GBP) has sustained a good chunk of the gains seen in February.

US Dollar (USD) Exchange Rates Steady Following Friday’s Disappointing Data

For much of last week, the safe haven US Dollar (USD) benefitted from weakness in rivals, as well as fresh market risk-aversion as geopolitical tensions and slowing global growth have made investors more eager to hold onto safe havens.

However, while the US Dollar saw stronger demand after a dovish European Central Bank (ECB) policy decision, the latest US non-farm payroll stats on Friday surprised investors and put some fresh pressure on USD.

Non-farm payrolls were forecast to come in at 180k, but instead slumped from 311k to just 20k. The surprisingly slow number of new jobs offset some optimism of the about the unemployment rate and wages.

Still, while this caused US Dollar rivals like the Japanese Yen (JPY) to strengthen on Friday, some analysts speculated this may just be a blip in the US jobs market. The US Dollar is still fairly appealing overall.

Pound to US Dollar (GBP/USD) Exchange Rate Traders Await Brexit Vote and US Data

It’s likely to be a highly influential few days for the Pound to US Dollar (GBP/USD) exchange rate, as not only will the UK government hold its second meaningful parliamentary Brexit vote, but major US data will be published in the coming days.

US retail sales from January will be published during today’s American session, and Federal Reserve Chairman Jerome Powell will hold a speech tonight.

Of course, tomorrow’s big focus will be the Parliament vote on Brexit – and there is not much confidence that it will succeed.

In the event the government’s plan does find enough support among MPs to pass, the Pound (GBP) could see a surge in demand.

If the deal still has a strong opposition though, concerns will worsen that a Brexit solution is still far away, and the Pound could be in for further weakness.

Even if the outcome of the vote is unsurprising and has little impact on the Pound, the Pound to US Dollar (GBP/USD) exchange rate could be driven by tomorrow’s US inflation rate report from February, due tomorrow afternoon.

Josh Jeffery

Contact Josh Jeffery