Pound Sterling to US Dollar (GBP/USD) Exchange Rate Slides as EU Warns of No-Deal Brexit Risk

GBP/USD Exchange Rate Plunges as Macron Warns of N0-Deal Brexit Risk

UPDATE: Comments from French President Emmanuel Macron prompted the Pound Sterling to US Dollar (GBP/USD) exchange rate to lose further ground this afternoon.

As Macron warned that the UK could see a no-deal Brexit if MPs reject Theresa May’s deal once again Pound Sterling (GBP) plunged lower.

With Parliament unlikely to support the deal, which has already seen two rejections, the odds of the UK leaving the EU without a deal next week rose sharply.

The US Dollar (USD), meanwhile, benefited as the latest Philadelphia Fed business outlook index bettered forecasts to rise from -4.1 to 13.7.

Pound Sterling US Dollar (GBP/USD) Exchange Rate Sinks as EU Pushes Back on Brexit Extension

The Pound Sterling to US Dollar (GBP/USD) exchange rate slumped sharply this morning in response to comments from key EU official Guy Verhofstadt.

As Verhofstadt stated that the Brexit deadline should not be extended beyond 22nd May, in order to avoid clashing with European parliamentary elections, the mood towards Pound Sterling (GBP) deteriorated.

With the EU looking set to reject Theresa May’s proposed three-month Brexit extension GBP exchange rates were left on the back foot.

This latest development saw the odds of a no-deal Brexit increase, with markets fearful that the UK could still crash out of the EU without a deal next week.

While UK retail sales data bettered forecasts in February this was not enough to shore up the GBP/USD exchange rate in the face of this fresh bout of Brexit-based anxiety.

Surprisingly Dovish Fed Dents US Dollar (USD) Exchange Rates

US Dollar (USD) exchange rates remained on a weaker footing, meanwhile, after last night’s unexpectedly dovish Federal Open Market Committee (FOMC) policy announcement.

Investors were caught off guard by the Federal Reserve’s decision to alter its dot forecasts, effectively ruling out the prospect of a 2019 interest rate hike.

With the Fed looking set to leave interest rates on hold for the foreseeable future, and with confidence in the economic outlook weakening, the appeal of the US Dollar diminished.

As Federal Reserve Chair Jerome Powell noted that it’s ‘a great time to be patient’ investors were left with limited incentive to favour the US Dollar.

Even so, with market risk appetite faltering USD exchange rates were able to return to a positive footing this morning.

Pound Sterling (GBP) Remains Weak as BoE Meeting Minutes Fail to Outweigh Brexit Worries

As the Bank of England (BoE) unanimously voted to leave interest rates on hold this failed to offer the GBP/USD exchange rate a rallying point.

With BoE policymakers’ hands tied by Brexit uncertainty markets continued to weigh up the odds of interest rates rising before the end of the year.

Until markets see a greater sense of clarity on Brexit the Pound looks set to remain under pressure.

If the two sides can move closer to a mutually agreeable deal this could help the GBP/USD exchange rate to recover some of its lost ground, though.

On the other hand, unless the odds of a no-deal Brexit ease Pound Sterling may struggle to find any solid traction against its rivals.

US Dollar (USD) Exchange Rates Vulnerable to Further Disappointing Data

Ahead of the weekend the US Dollar may come under increased selling pressure, however, if domestic data continues to disappoint.

Another month of contraction in wholesale trade sales could weigh heavily on USD exchange rates, given increasing worries over the resilience of the US manufacturing sector.

On the other hand, forecasts point towards a solid rebound from February’s existing home sales data.

If the US housing market shows signs of recovery this could offer a boost to USD exchange rates, in spite of the Fed’s increasing dovishness.

Weakening odds of an imminent US-China trade deal may also dent the US Dollar, even in the face of diminished market risk appetite.

Louisa Heath

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