Pound US Dollar (GBP/USD) Exchange Rate Slumps to Three-Day Low

GBP/USD Exchange Rate Sinks on Brexit Uncertainty

(Updated: 14:25, 28/6/22) The Pound US Dollar exchange rate has fallen this afternoon, sliding to a new three-day low.

The pullback in the GBP/USD exchange rate comes as Brexit jitters continue to weigh on Sterling sentiment. Markets are growing increasingly unnerved by the prospect of a UK-EU trade war and its potentially impact on the UK’s already floundering economy.

Meanwhile the US Dollar is rising in tandem with US Treasury yields, which have seen a solid pickup following the opening of today’s US trading session.

Original article continues below:

Pound US Dollar Exchange Rate Rangebound amid UK Political Jitters

The Pound US Dollar (GBP/USD) exchange rate is trapped in a narrow range this morning amid heightened UK political uncertainty.

At the time of writing the GBP/USD exchange rate is trading at around $1.2256. Virtually unchanged from this morning’s opening levels.

Pound (GBP) Muted amid Brexit Concerns

The Pound (GBP) is trading in a narrow range this morning. Renewed Brexit concerns limiting Sterling’s upside potential

This comes as the UK government’s Northern Ireland protocol bill passed its first hurdle on Monday. The House of Commons voted 295 to 221 in favour of the bill yesterday.

The legislation will allow the government to unilaterally alter the protocol agreed with the EU as part of the UK’s Brexit deal. Former Prime Minister Theresa May has warned the bill breaches international law.

GBP investors fear the effective scrapping of parts of the Brexit deal could trigger a UK-EU trade war. Further disrupting the flow of goods and likely placing even more pressure on the UK economy.

Nicola Sturgeon is further stoking UK political uncertainty this morning. The Scottish First Minister is set to outline her plan to hold a second independence referendum later this afternoon. Her plan is expected to involve holding a lawful vote next year.

The prospect of another independence referendum will not fill GBP investors with confidence, particularly amid suggestions it might win enough support this time around.

US Dollar (USD) Subdued in Risk-On Trade

The US Dollar (USD) is struggling to find direction this morning. Risk-on flows denting demand for the safe-haven currency.

The positive mood appears driven by signals that the major central banks may moderate the pace of their rate hikes as they seek to avoid a global recession.

This is offsetting an uptick in US Treasury yields, which may otherwise have bolstered the ‘Greenback’ this morning.

Pound US Dollar Exchange Rate Forecast: Fed and BoE Speeches in the Spotlight

Speeches from Bank of England (BoE) Governor Andrew Bailey and Federal Reserve Chair Jerome Powell are likely to act as the main catalyst of movement in the Pound US Dollar exchange rate on Wednesday.

Bailey and Powell will both be speaking at the European Central Bank’s (ECB) Forum on Central Banking. The theme for the forum is ‘challenges for monetary policy in a rapidly changing world’.

The central bank leaders are expected to discuss how they will tackle surging inflation and hint at future monetary policy.

Bailey could bolster the Pound if he hints that future rate hikes from the BoE will be more aggressive.

Meanwhile Powell could undermine the US dollar if he continues to warn of the risks of the bank’s hikes tipping the US into a recession.

Matthew Andrews

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