GBP/USD Exchange Rate Rebounds from Early Losses
The Pound Sterling to US Dollar (GBP/USD) exchange rate is drifting higher this morning, having bounced back from its initial sell-off this week amidst some renewed Brexit optimism.
At the time of writing the GBP/USD exchange rate is trading at around $1.2983, just below a five-month high of $1.30 struck earlier.
Pound (GBP) Finds Support, Does Johnson Have the Numbers to Pass His Brexit Deal?
The Pound (GBP) broke through a key resistance level against the US Dollar (USD) this morning, amidst speculation Boris Johnson may have the numbers needed to get his deal through parliament.
This comes after Sterling initially tumbled at the opening bell this week after an extraordinary sitting of parliament on Saturday ended without MP’s voting on Johnson’s Brexit deal.
Johnson faced a major setback over the weekend after MP’s backed an amendment to postpone the ‘meaningful vote’ until the legislation to implement it had been passed, forcing Johnson to send a letter to the EU asking for another Brexit extension.
However Johnson is already pushing for a yes/no vote on his Brexit deal later today.
Brexit: No 10 to push again for vote on Boris Johnson's deal https://t.co/IoDtiDU8RS
— BBC Politics (@BBCPolitics) October 21, 2019
Neil Wilson, Chief Market Analyst at Markets.com comments:
‘It looks like Boris Johnson will make another stab at winning parliamentary support for his Brexit deal. We need to see if Speaker John Bercow allows it – his record on frustrating Brexit is well known.
‘Otherwise the government will bring forward implementation legislation quickly to drive through the bill in time so that a delay is not required.’
Most importantly however is that the Parliamentary arithmetic now appears to have shifted in Johnson’s favour, with Sterling buoyed as analysts speculate the government has a narrow majority of around 5 votes.
US Dollar (USD) Undermined by Persistent Selling
Meanwhile, a prevalent selling bias continued to drag on the US Dollar (USD) at the start of this week.
Markets have grown increasingly bearish towards the ‘Greenback’ over the last few days, with traders shunning the safe-haven currency amidst a prevailing risk-on mood in markets.
This uptick in risk sentiment comes largely on the back of positive US-China trade headlines suggesting a ‘Phase 1’ deal looks increasingly likely.
Also adding pressure to USD exchange rates are firming expectation that the Federal Reserve will cut rates again this month, with the odds of an October rate cut sitting at over 90% according to CME’s FedWatch tool.
GBP/USD Exchange Rate Forecast: Next 48 Hours are Key
It seems safe to assume that Brexit will continue to act as the main catalyst for the Pound to US Dollar (GBP/USD) exchange rate at the start of this week.
Should Johnson be allowed to push forward with his ‘meaningful vote’ and secure the numbers needed to push it through parliament, there is scope for a significant upside in Sterling.
Conversely should the vote not go ahead, or the deal be voted down then the Pound is at risk of a sharp sell-off.
Meanwhile, USD investors will be focused on the latest US durable goods order figures this week, with the US Dollar likely to suffer if orders contract in line with expectations in September.