GBP/USD Exchange Rate Plummets on Renewed Brexit Jitters
The Pound US Dollar (GBP/USD) exchange rate has fallen sharply today on the back of renewed fears that the UK could be facing a no-deal Brexit.
At the time of writing the GBP/USD exchange rate is trading at around $1.3154, having plummeted roughly 0.8% from the morning’s opening levels.
Pound (GBP) Tumbles as Brexit Bill to Block Further Extensions
The Pound (GBP) has now relinquished nearly all of its post-election gains in response to fresh worries that the UK could be at risk of a no-deal Brexit.
These concerns have been sparked by the announcement that Boris Johnson’s Brexit bill, which is expected to pass through parliament on Friday, will include a clause which will legally block any extension to the transition period.
With a deadline of December 2020 set to be enshrined in law, it leaves Johnson with only twelve months in which to negotiate the UK’s future trade relationship with the EU.
This has seen all the post-election cheer sucked out of Sterling as it erases any hopes that Johnson’s overwhelming majority in parliament would allow him to adopt a more pragmatic approach to negotiations.
Neil Wilson of Markets.com, commented:
‘Sterling tripped over its heels as Boris Johnson is looking to legislate for Britain to leave the EU fully in Dec 2020 with or without a trade deal. That means no possible way to extend the transition period.
‘This sets up another cliff-edge and could create yet more months of uncertainty for investors just when we thought all was squared away.’
Placing additional pressure on the Pound today was also the publication of the UK’s labour report as it revealed wage growth dropped sharply in October.
US Dollar (USD) Buoyed by Solid Industrial Production Figures
Meanwhile the US Dollar (USD) is enjoying some broad support today, reversing some of Monday’s losses on the back of stronger-than-expected domestic industrial production.
Data published by the Federal Reserve revealed US factory output grew by 1.1% in November, rebounding from a 0.9% contraction in October and beating market expectations for a more modest 0.8% expansion.
The result was welcomed by USD investors on hopes it shows that the recent slump in the US manufacturing sectors will prove to be a blip rather than the start of a prolonged downtrend.