Pound Sterling to US Dollar (GBP/USD) Exchange Rate Slips from 9-Month High amid Brexit Uncertainty

Weak US Home Sales Fail to Shore up GBP/USD Exchange Rate

UPDATE: A surprise contraction in US new home sales failed to encourage a Pound Sterling to US Dollar (GBP/USD) exchange rate rally this afternoon.

Although sales plunged -6.9% on the month in January the mood towards the US Dollar (USD) remained generally positive, with investors instead focusing on the improved import and export price index figures.

With signs pointing towards an increase in inflationary pressure this encouraged USD exchange rates to extend their gains over the course of the afternoon.

Pound Sterling US Dollar (GBP/USD) Exchange Rate Loses Momentum in spite of No-Deal Rejection

The Pound Sterling to US Dollar (GBP/USD) exchange rate was unable to maintain its bullish momentum this morning as the impact of last night’s parliamentary vote faded.

After MPs rejected the prospect of a no-deal Brexit Pound Sterling (GBP) made solid gains across the board, fuelled by relief that the UK is no longer at risk of crashing out of the EU without a deal.

Even so, this latest defeat for Theresa May further damaged her position as prime minister as well as ushering in a fresh sense of uncertainty over the ultimate outcome of the Brexit process.

February’s RICS house price balance fell short of forecast, meanwhile, plunging -28% on the month as the housing market continued to slow.

This weakness adds to the general sense of uncertainty surrounding the UK’s future, helping to knock the GBP/USD exchange rate back from its nine-month high.

Brexit Uncertainty Set to Provoke Further GBP/USD Exchange Rate Volatility

Further volatility is likely in store for the GBP/USD exchange rate this evening as MPs prepare to vote on extending the Article 50 deadline.

If Parliament approves an extension this could offer the Pound a fresh bout of encouragement, in spite of the pervading sense of uncertainty.

As an extended deadline may increase the odds of a softer form of Brexit, or even a second referendum, investors are likely to take encouragement from such a vote.

However, with Brexit-based anxiety already weighing on economic activity the prospect of an even longer period of political uncertainty may dent GBP exchange rates ahead of the weekend.

Brexit developments look set to remain the major influence on the GBP/USD exchange rate in the days ahead, especially if markets continue to lack a sense of clarity.

US Dollar (USD) Exchange Rates Strengthen Ahead of Jobless Claims Figures

The US Dollar (USD) could recover further ground against its rival this afternoon if the latest US jobless claims data proves encouraging.

After last week’s underwhelming jobs data investors are likely to greet any fresh signs of a tightening labour market.

On the other hand, an uptick in the jobless claims numbers could put further pressure on USD exchange rates.

With the Federal Reserve looking set to maintain a cautious policy outlook in the months ahead, holding off on any further monetary tightening, weaker data could weigh heavily on the US Dollar.

Consumer Sentiment Rebound to Encourage US Dollar (USD) Demand

Friday’s University of Michigan consumer sentiment index may offer USD exchange rates a boost, however.

As forecasts point towards confidence picking back up in the wake of February’s sharp decline, with the index expected to strengthen from 93.8 to 95.6, the mood towards the US Dollar could improve.

Evidence of resilient consumer confidence may encourage a greater sense of optimism over the outlook of the world’s largest economy, even in the face of a weaker manufacturing sector.

An increased sense of market risk aversion could also offer encouragement to the US Dollar in the near term, leaving the GBP/USD exchange rate exposed to downside pressure.

Louisa Heath

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