GBP/USD Exchange Rate Tumbles as Speaker Rejects PMs Third Brexit Vote
UPDATE: The Pound Sterling to US Dollar (GBP/USD) exchange rate continued to trend lower this afternoon, as it appeared unlikely that Theresa May’s Brexit deal will go ahead this week.
This comes after UK Parliament Speaker John Bercow said the government may not put the PM’s deal to another vote this week unless there is some notable change.
While Bercow has said this is not his final word on the manner, his comments appear to have scuppered any chance of a vote being held ahead of the EU summit taking place at the end of the week.
Pound US Dollar (GBP/USD) Exchange Rate Stumbles as Third Brexit Vote Looms
The Pound Sterling to US Dollar (GBP/USD) exchange rate is trending lower at the start of this week’s session as skittish investors steer clear of Sterling ahead of a potential third vote on Theresa May’s Brexit deal.
At the time of writing the GBP/USD exchange rate is down 0.4% so far this morning, leaving the pairing trading at around $1.3239.
Pound (GBP) Weakens Ahead of Latest Brexit Vote
After rocketing higher last week, the Pound (GBP) is relinquishing ground against the US Dollar (USD) and the majority of its other peers this morning due to caution ahead of yet another vote on Theresa May’s Brexit deal this week.
Things do not look hopeful for the PM so far however, with the Democratic Unionist Party (DUP) still appearing unconvinced by the backstop agreement while a bloc of staunch Eurosceptic Conservatives signalled that they would not back the deal under any circumstances.
However, May has stated that a rejection of her deal is likely to lead to a lengthy delay to Brexit, something that is generally viewed as positive for the Pound.
This leaves Sterling in a state of flux at the start of this week, with GBP investors erring on the side of caution ahead of the vote.
US Dollar (USD) Tempered by Caution Ahead of Fed Decision
Meanwhile the US Dollar (USD) finds its gains clipped at the start of this week’s session as investors shy away from the US currency as they brace for the Federal Reserve policy meeting on Wednesday.
The Fed is widely expected to deliver a dovish rate decision this week, with the majority of economists forecasting that the US central bank will reinforce its desire for a cautious approach to monetary policy this year.
Some analysts suggest this could involve the Fed revising its outlook on interest rates for the coming year, likely dropping its forward guidance that suggested there would be up to two rate hikes in 2019.
Yelena Shulyatyeva, Senior US Economist at Bloomberg Economics, suggests:
‘A further downward shift in the Fed’s dot plot will occur, but the median should still reflect at least one rate hike this year.’
USD investors are also likely to keep a close eye on the Fed’s economic projections, with the US Dollar likely to face further pressure if the bank acknowledges domestic growth has begun to slow.
GBP/USD Exchange Rate Forecast: Slide in UK Wage Growth to Dent Sterling?
Looking ahead, while the focus is likely to remain on the upcoming Brexit vote, the Pound US Dollar (GBP/USD) exchange rate may still show some movement tomorrow with the release of the UK’s latest labour figures.
This may see Sterling (GBP) continue to retreat on Tuesday as economists forecast that UK wage growth peaked at the end of last year and that it will have slipped back from 3.4% to 3.2% in January, damping the chances of the Bank of England (BoE) hiking rates this year even in the event of an orderly Brexit.
Meanwhile potentially providing some lift to the US Dollar (USD) tomorrow will be the publication of the latest US factory order data, with economists forecasting a modest acceleration in order growth in January.