GBP/USD Strikes Five-Week High as Boris Johnson’s Brexit Setbacks Cheered by Investors

GBP/USD Exchange Rate Surges on Brexit Optimism

Updated: The Pound Sterling to US Dollar (GBP/USD) exchange rate extended its rally for a third consecutive session on Thursday, as fears of a no-deal Brexit continued to fade.

This propelled GBP/USD as high as $1.2354 this afternoon, bringing the pairing gains to over 3% since striking a three-year low on Tuesday.

The rally in Sterling comes Boris Johnson’s authority continues to be eroded, with the latest blow coming as his own brother resigned from his government in apparent protest at the PM’s handling of Brexit.

Meanwhile the US Dollar failed to reverse its recent sell-off, despite the US ISM non-manufacturing PMI coming in well above expectations in August.

GBP/USD Exchange Rate Shows Resilience amid Brexit Optimism

The Pound Sterling to US Dollar (GBP/USD) exchange rate remains on the front foot this morning, boosted by hopes a no-deal Brexit will be avoided.

At the time of writing the GBP/USD exchange rate is trading at around $1.2267, having rallied over 1% on Wednesday.

Boris Johnson’s Brexit Defeats Turbo Charge the Pound (GBP)

The Pound (GBP) skyrocketed against the US Dollar (USD) on Wednesday, propelling the pairing close to a one-month high as no-deal Brexit fears continue to fade.

So far this week we have seen GBP/USD surge nearly three cents, snapping back from a three-year low struck in the first half of the session.

The latest upswing in Sterling comes as Boris Johnson suffered two major defeats in parliament on Wednesday.

UK MPs backed a bill yesterday to extend the Brexit deadline for a third time, preventing the UK from crashing out of the EU without a deal on 31 October.

The PM then saw his motion to hold a snap election rejected by parliament as it failed to secure the 2/3 majority needed under the fixed-term parliament act.

Johnson is not expected to take the defeat lying down however and it set to address the public today to outline why he believes a general election is necessary.

This could stoke some volatility in Sterling depending on whether the PM has any tricks up his sleeve.

Positive US-China Trade Headlines Offers Support to Bearish US Dollar (USD)

While the US Dollar (USD) continues to struggle to attract buying interest this morning, the currency has been prevented from extended its recent losses thanks to optimism on US-China trade.

This comes as the US and China formally agreed to restart high-level trade talks in Washington this month.

US-China trade tensions has been blamed for the recent slowing of the US economy so any news that the two sides be moving towards resolving their dispute will be welcomed by USD investors.

However despite the positive developments, analysts remain sceptical that the talks will deliver any real progress, limiting the upside in the US Dollar.

GBP/USD Exchange Rate Forecast: How Might the ISM Non-Manufacturing PMI Impact the US Dollar?

Coming up, the publication of the latest ISM non-manufacturing PMI could see the (GBP/USD) exchange rate extend its recent recovery later this afternoon.

While current forecasts suggest a modest expansion in the US service sector last month, there are fears that the data could underperform following the shock contraction in the manufacturing PMI.

Should growth have slowed its likely we may see the bearish trend in the US Dollar persist through another session as it likely increases US recession fears and bolsters expectations for sustained monetary easing from the Federal Reserve.

For GBP Investors UK politics will no doubt remain in the spotlight for GBP investors through the remainder of the week, with speculation that Boris Johnson could table a second motion for a general election on Friday.

Matthew Andrews

Contact Matthew Andrews