GBP/USD Exchange Rate Rangebound as Brexit Deal in the Balance
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently stuck in a narrow range this morning as markets brace for a parliamentary clash on Boris Johnson’s Brexit deal.
At the time of writing the GBP/USD exchange rate is trading at around $1.2876, virtually unchanged from this morning’s opening rate.
Pound (GBP) Steady ahead of Parliament’s Brexit Vote
The Pound (GBP) is holding steady against the US Dollar (USD) and the majority of its other peers this morning as markets remain cautious going into a key parliament vote on Saturday.
While Boris Johnson has managed to pull off one miracle by getting the EU to agree to a new Brexit deal, he faces an even greater hurdle in persuading MP’s to back said deal.
Observers suggest the vote will come down to the wire after the Democratic Unionist Party rejected the deal.
Petr Krpata, Chief EMEA FX and IR Strategist at ING writes:
‘Although the UK and the EU have reached a Brexit deal, it remains uncertain if it can pass in Parliament, largely due to the DUP’s rejection of the deal.
‘Our base case is that a deal will likely fail to get approved this Saturday, albeit by a very small margin of possibly two to three votes.’
Unsurprisingly this has left GBP investors on edge this morning, limiting movement in Sterling.
US Dollar’s (USD) Bearish Trend Persists
Meanwhile, the US Dollar (USD) continues to suffer from broad weakness this morning, amidst persistent selling bias.
The pullback in USD comes as a risk-off mood prevails in markets, with lingering optimism of a partial US-China trade deal continuing to undermine safe-haven demand.
Also keeping investors away from the US Dollar this morning is firming expectations that the Federal Reserve will implement another rate cut this month
According to CME Group’s FedWatch toll, the odds of an October cut currently stand at 85%, with a recent contraction in consumer spending only adding to expectations that the Fed will ease its monetary policy again this month.
GBP/USD Exchange Rate Forecast: More Brexit Volatility Ahead?
Looking to next week, we can expect movement in the Pound to US Dollar (GBP/USD) exchange rate to be determined by Saturday’s Brexit vote.
Should the deal be rejected by Parliament then we are likely to see Sterling fall off a cliff, relinquishing much of the gains made over the past couple of week as we see a return of the uncertainty which has plagued GBP exchange rates for months.
Conversely should the deal be given a green light by MPs then we can expect to see the Pound to shoot higher, with the GBP/USD exchange rate potentially testing highs not seen since the EU referendum.
For USD investors the focus next week will be on the latest US durable goods order figures.
This may send the US Dollar lower in the mid-week, as an expected contraction in orders last month is likely to raise further concerns over the state of the US economy.