Pound to US Dollar Exchange Rate Rising as Supreme Court Rules Against Government
The Pound to US Dollar (GBP/USD) exchange rate saw fairly modest movement on Tuesday morning, but after the UK Supreme Court ruling on parliament’s prorogation the Pound (GBP) started to climb.
Due to the resilient strength of the US Dollar (USD) amid safe haven demand, GBP/USD has been edging lower since the middle of September.
GBP/USD slipped from the interbank level of 1.25 into the region of 1.24 throughout last week, and has continued to slide lower into the interbank level of 1.24 since markets opened this week.
The Pound’s recovery following this morning’s Supreme Court news has been fairly modest so far though, and GBP/USD remains in the region of 1.24 at the time of writing.
Pound (GBP) Exchange Rates Bolstered as Supreme Court Ruling Boosts Soft Brexit Hopes
In what is the latest surprise in the volatile Brexit saga, Britain’s Supreme Court today ruled unanimously that the government’s long prorogation of parliament unlawful and that parliament had not been prorogued.
It followed the claim of prorogation being unlawful being rejected by English high courts, but being perceived as justiciable by Scottish high courts.
Lady Hale, President of the Supreme Court, said that as the prorogation was found as ‘unlawful, void, and of no effect’. According to an extract from the ruling:
‘The prorogation was also void and of no effect. Parliament has not been prorogued. This is the unanimous judgment of all 11 Justices.’
Following the ruling, Speaker John Bercow said parliament must reconvene without delay.
Amid hopes that UK Parliament would quickly resume under this ruling and MPs could continue to take action to prevent a no-deal Brexit, the Pound advanced today.
Its advances were limited however, as this ruling also leads to a fresh period of uncertainty for British politics.
US Dollar (USD) Exchange Rates Slide as Investors More Willing to Take Risks
The safe haven US Dollar (USD) saw strong demand at the beginning of the week, as rising geopolitical tensions between Saudi Arabia and Iran, as well as Brexit jitters, left investors looking for safer assets.
The US Dollar also benefitted from perceived progress in US-China trade negotiations, amid hopes that the US economy would benefit strongly from the trade war deescalating.
However, following the Supreme Court’s ruling this morning, as well as a lack of fresh support for the US Dollar, the US currency saw modest losses against many major rivals as investors were a little more willing to take risks.
Yesterday’s US PMI projections from Markit were too mixed to offer the US Dollar any solid support. While manufacturing beat expectations, services fell short and analysts remained concerned about the health of US manufacturing regardless.
Pound to US Dollar (GBP/USD) Exchange Rate Refocuses on Brexit as Parliament May Reconvene
UK Parliament was previously set to remain prorogued until the 14th of October, an additional three weeks. With the British Supreme Court ruling that parliament had not been prorogued, those three weeks could be considerably different now.
MPs may now have the opportunity to return to parliament and take further action on Brexit, including further potential ways to prevent a no-deal Brexit. There is also uncertainty over how the government will handle the ruling.
Either way, Pound (GBP) investors will be closely watching parliament for fresh developments in domestic politics and Brexit. It may not all be Pound-positive though.
If the developments with parliament interfere with the government’s planned UK-EU negotiations at the UN General Assembly this week, or political uncertainty deepens, Sterling could weaken instead.
With more chaos in UK politics likely ahead, the Pound is more likely to drive GBP/USD movement than the US Dollar (USD) in the coming days.
Still, upcoming US data such as growth rate stats on Thursday and PCE inflation figures on Friday could influence Federal Reserve speculation and the Pound to US Dollar (GBP/USD) exchange rate if they surprise.