Pound Sterling US Dollar Exchange Rate News: GBP/USD Nosedives as May Pushes For Short Brexit Delay

GBP/USD Exchange Rate Plummets as PM Seeks Three Month Brexit Extension

UPDATE: The Pound Sterling to US Dollar (GBP/USD) exchange rate continued to trend lower on Wednesday afternoon, striking a low of $1.3177, as Sterling was rocked by the latest Brexit developments.

Theresa May confirmed this afternoon that she had written to the EU to request a short extension to Brexit, vowing the UK would no remain in the EU beyond June, disappointing investors who had hoped for a lengthier delay.

On top of this the response from the EU appeared frosty, with reports suggesting that officials questioned what such a short delay could achieve and how it would impact the upcoming EU elections.

GBP/USD Exchange Rate Slips as May to Only Ask for Short Brexit Extension

The Pound Sterling to US Dollar (GBP/USD) exchange rate is on the back foot this morning as investors appear disappointed by reports that Theresa May will only seek a short delay to Brexit.

At the time of writing the GBP/USD exchange rate is down 0.3% so far this morning, leaving the pairing trading at around $1.1652.

Pound (GBP) Slides as Brexit Uncertainty Offsets Modest Rise in Inflation

The Pound (GBP) is on the defensive against the US Dollar (USD) and the majority of its other peers this morning as it emerged that Theresa May will only request a short Brexit extension from the EU.

The news came as a disappointment to GBP investors, many of whom had hoped that a longer delay would help keep the status quo and even potentially pave the way for a second referendum.

It also remains unclear whether the EU will even accept an extension, with the EU’s Chief Brexit negotiator, Michel Barnier warning a delay could not be granted unless the UK has a ‘concrete plan’ of what to do with the extra time.

The focus on Brexit also saw the release of the UK’s latest CPI figures largely side-lined by markets, with GBP investors unfazed as domestic inflation saw a modest rise from 1.8% to 1.9% in February

US Dollar (USD) Gains Amid Renewed US-China Trade Tensions

Meanwhile the US Dollar (USD) has found itself in demand this morning as renewed US-China trade concerns drove investors towards the safe-haven currency.

The catalyst for these fears appeared to be a report from Bloomberg suggesting that Chinese officials are shifting their stance on a number of pledges made to the US.

The report suggests that Beijing has stepped back from promises made on data protection and pharmaceuticals and is seeking to ensure the wording of any deal is compliant with Chinese law.

It was previously thought that the US and China were close to signing off on a deal, leading a positive outcome in talks to be priced into the US Dollar.

However should the pushback from Beijing result in talks dragging on further then we could see renewed interest in USD and other safe-haven currencies going forward.

GBP/USD Exchange Rate Forecast: Dovish Fed to Upset the US Dollar this Evening?

Looking ahead, the Pound US Dollar (GBP/USD) exchange rate may look to rally later this evening as the Federal Reserve concludes its latest policy meeting.

No policy changes are expected from the Fed this month, but economists warn that the bank is likely to signal a more dovish outlook for the coming year.

Analysts suggest this may see the Fed alter its interest rate path for 2019, with the FOMC likely to signal that it will no longer be targeting up to two rate hikes this year.

Meanwhile barring any other major Brexit developments, the main catalyst for movement in the Pound in the second half of the week is likely to be the Bank of England’s own rate decision.

Again no policy changes are expected this month, but we could see some movement in Sterling on the back of the BoE’s forward guidance, with GBP investors eager for the bank’s assessment on the current state of Brexit and how a delay may impact plans for a rate hike this year.

Matthew Andrews

Contact Matthew Andrews