GBP/USD Exchange Rate Dips as May Leans Towards a No-Deal Brexit
UPDATE: The Pound Sterling to US Dollar (GBP/USD) exchange rate is on the retreat today, with the pairing striking as low as $1.3012 amidst renewed concerns of a no-deal Brexit.
This appeared to be fuelled by reports that Theresa May told her cabinet that she would opt for a no-deal Brexit before revoking Article 50, dampening the appeal of Sterling.
However, the pairing’s losses were capped somewhat by the release of the latest US durable goods orders, with a sizable contraction in orders in February, denting the appeal of the US Dollar.
GBP/USD Exchange Rate Buoyed by Brexit Compromise Speculation
UPDATE: The Pound Sterling to US Dollar (GBP/USD) exchange rate has extended its gains this afternoon rising as much as 0.5% on hopes this evening’s indicative votes could see MPs reach a compromise agreement on how to proceed with Brexit.
Most observers suggest this will see MPs back a customs union with the EU, with the speculation of a softer approach to Brexit further lifting the appeal of Sterling.
Meanwhile, the US Dollar came under pressure this afternoon after the latest US retail sales figures revealed a surprise contraction in sales growth in February.
GBP/USD Exchange Rate Accelerates as UK Manufacturing PMI Strikes One-Year High
The Pound Sterling to US Dollar (GBP/USD) exchange rate ticked higher this morning, lifted by the release of the UK’s latest manufacturing PMI.
At the time of writing the GBP/USD exchange rate is up around 0.3% so far, leaving the pairing trading just shy of $1.31.
Pound (GBP) Buoyed as UK Manufacturing Sector Expands
The Pound (GBP) is accelerating against the US Dollar (USD) this morning as Sterling was granted a much-needed reprieve from Brexit, thanks to the release of the UK’s latest manufacturing PMI.
According to data published by IHS Markit, activity in the UK’s factory sector shot up last month, with the manufacturing index surging from 52.1 to 55.1 – easily beating forecasts that it would slide to 51.
🇬🇧 UK Manufacturing PMI ⬆️ to 13-month high of 55.1 (52.1 – Feb), as Brexit preparations, primarily stockpiling, remain prominent. Output, employment and new order growth rates strengthen as part of efforts to stave off Brexit-related disruptions. https://t.co/BRqwujk36b pic.twitter.com/9S8BN2bcKM
— S&P Global PMI™ (@SPGlobalPMI) April 1, 2019
While this points to growth in the UK’s factory sector expanding at its fastest pace in over a year, analysts suggests this was that this was likely driven by Brexit uncertainty, with production ramped up to build stockpiles over fears of supply disruptions after Brexit.
Rob Dobson, Director at IHS Markit said:
‘Manufacturers reported a surge of business activity in March as companies stepped-up their preparations for potential Brexit-related disruptions.
‘Output, employment and new orders all rose at increased rates as manufacturers and their clients raced to build safety stocks. Stocking of finished goods and input inventories surged to new survey-record highs.’
However, likely tempering Sterling’s gains this morning is the expectation that this growth will be unsustainable, with activity forecast to come crashing back down to earth in the future as things normalise. Dobson added:
‘The stock-building boost introduces a major headwind for demand, output and jobs growth moving forward. Manufacturers are already reporting concerns that future trends could be constrained as inventory positions across the economy are unwound.’
GBP/USD Exchange Rate Forecast: More Volatility Ahead as Further Brexit Votes in Sight
Looking to the week ahead, the Pound US Dollar (GBP/USD) exchange rate is expected to be hit by further volatility throughout the session as Parliament is set to hold further Brexit votes.
This kicks off with a second round of indicative votes set to take place this evening, with MPs once again debating a series of Brexit alternatives.
Should MPs be unable to reach a majority for any of the solutions put forth then this may open the door for Theresa May to make a fourth attempt at pushing her Brexit withdrawal deal through Parliament.
Some observers even suggest that May is ready to trigger another general election if Parliament fails to agree to a way forward, likely putting additional pressure on Sterling as it adds further uncertainty into the mix.
In the meantime, USD investors have a slew of US data to sink their teeth into this week, starting with the publication of the latest US retail sales figures and ISM Manufacturing PMIs this afternoon, which could potentially weaken the US Dollar if they indicate that US economic activity continues to slow.