GBP/USD Exchange Rate Stumbles ahead of Vote on Brexit Legislation
The Pound US Dollar (GBP/USD) exchange rate is on the defensive this morning ahead of a crucial Brexit vote in parliament later this evening.
At the time of writing the GBP/USD exchange rate is trading at around $1.2932 this morning, down roughly 0.3% from this morning’s opening levels.
Pound (GBP) to Rally if MP’s Support Withdrawal Legislation
The Pound (GBP) lacks direction this morning as markets brace for a vote on Boris Johnson’s Withdrawal Agreement Bill (WAB) later this evening.
Having failed to secure a second ‘meaningful vote’ on this Brexit deal, Johnson is determined to push ahead with plans to put the WAB in front of parliament today.
Published yesterday, the bill covers the various legislation that needs to be passed before the UK can ratify the deal agreed with the EU last week.
Johnson is hoping to rush the bill through parliament in the next three days so he can keep his promise to lead the UK out of the EU on 31 October.
This will involve two votes, this first, known as the ‘second reading’ is set to take place at 18:00 GMT today, and could provide some support to Sterling if it passes as expected.
This will then provide the opportunity for MP’s to amend the bill ahead of a second vote on the timetabling of the bill, potentially infusing some volatility into GBP exchange rates, particularly if there is enough support to push for a confirmatory referendum.
US Dollar (USD) Rallies but Gains Look Limited as Fed Rate Cuts Loom
Meanwhile across the pond, the US Dollar (USD) has found some modest support this morning, helping to reverse some of the currency’s recent losses.
A USD selling bias has prevailed in recent days, leading the US Dollar to steadily give ground against its peers.
Some of this selling has been attributed to the recent US-China trade optimism, with has resulted in a risk-on mood in markets and undermined demand for the safe-haven ‘Greenback’.
However the underlying weakness in the US Dollar appears mostly driven by firming expectations that the Federal Reserve will cut interest rates again this month.
The odds of an October cut currently sit at over 90% according to CME’s FedWatch tool, with bets already being made that the Fed could follow this up with yet another cut in December.