GBP/USD Exchange Rate Sides as Investors Brace for Brexit Drama
The Pound Sterling to US Dollar (GBP/USD) exchange rate traded lower at the start of this week as markets braced for what is likely to be another busy session dominated by Brexit developments.
At the time of writing the GBP/USD exchange rate is down roughly 0.3% so far this morning, leaving the pairing trading at around $1.3173.
Pound (GBP) Slips as Brexit Nerves Flare
The Pound (GBP) opens this week on the defensive against the US Dollar (USD) and the majority of its other peers as GBP investor remain cautious ahead of another week full of expected Brexit drama.
Investors appear to be steering clear of Sterling this morning as pressure on Theresa May to either step aside or announce a date for her departure reaches fever pitch.
While senior ministers have denied a plot to oust her, it’s becoming increasingly clear that the tide is turning against the PM after she conceded over the weekend that her withdrawal deal still stands little chance of getting through Parliament, writing in a letter to MPs that the vote itself would not go ahead if there didn’t appear there was ‘sufficient support’.
This has unsurprisingly unnerved many GBP investors this morning, as it fuels further uncertainty to whole Brexit process.
GBP/USD Exchange Rate Forecast: Sterling to Plummet if May Fails to Survive the Week?
Looking ahead, the Pound US Dollar (GBP/USD) exchange rate is facing another week of volatility as the session looks to again be dominated by the various twists and turns of Brexit.
Analysts are speculating on the possibility of Parliament wresting control of Brexit away from the government this week, potentially strengthening Sterling as a third vote on Theresa May’s withdrawal deal looking increasingly unlikely to go ahead.
On the other hand as speculation over May’s leadership grows, trade in GBP is likely to become increasingly erratic as the rumour mill cranks into high gear, with the Pound expected to be met by heavy losses if the PM is eventually ousted.
Rodrio Catril, Senior FX Strategist at the National Australia Bank suggests:
‘With a large majority of British MPs against a no-deal outcome, and parliament likely to take steps to take control of the process this week, there is scope for GBP to build on its gains from Friday.’
‘But with Theresa May coming under heavy political pressure to resign and the tail risk of new elections, it’s still likely to be a bumpy ride.’
Meanwhile, in the absence of any other data, the publication of the Dallas Fed’s Manufacturing Index is likely to be in focus for USD investors at the start of this week, potentially lending some support to the US Dollar if it performs similarly well to last week’s Philadelphia index.