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Pound Sterling to US Dollar Exchange Rate Tumbles Back as Political Uncertainties Cloud Outlooks

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Pound to US Dollar Exchange Rate Sheds Yesterday’s Recovery Attempt

After attempting to recover on a combination of softer Brexit hopes and US political jitters yesterday, the Pound Sterling to US Dollar (GBP/USD) exchange rate has tumbled again today. Investors reconsidered yesterday’s movement amid outlook uncertainties.

Following last week’s slip from 1.2501 to 1.2471, GBP/USD may be in for another week of modest losses. GBP/USD has been trending with a downside bias since markets opened on Monday.

While GBP/USD recovered to near the week’s opening levels yesterday, it was tumbling again today and trended closer to a low of 1.2407.

The Pound (GBP) has been sliding as UK Parliament reconvenes with no-deal Brexit fears persisting, while the US Dollar (USD) recovered some of last night’s losses amid speculation that impeachment efforts are unlikely to remove US President Donald Trump from office.

Pound (GBP) Exchange Rates Tumble as UK Political Uncertainties Deepen

The Pound saw a brief surge in demand yesterday, as Britain’s Supreme Court ruled unanimously that Prime Minister Boris Johnson’s long prorogation of parliament was unlawful.

The court ruled that the unusual length of prorogation had prevented parliament from performing its duty of holding the government to account. As a result, it ruled the prorogation void.

UK Parliament resumes today, giving MPs an extra few weeks in session. Yesterday, it bolstered hopes that MPs would continue to find ways to prevent a no-deal Brexit.

However, today the Pound has fallen back amid concerns that this extraordinary ruling against the government would lead to even deeper uncertainty.

Analysts expressed concern that there was still no clarity at all on how Brexit would conclude, despite the 31st of October exit date being just over a month away.

US Dollar (USD) Exchange Rates Recover as Trump Impeachment Fears Limited

Overnight, the US Dollar briefly tumbled as the US Democratic Party announced a formal impeachment inquiry into President Donald Trump would be held.

Democratic House Speaker, Nancy Pelosi, announced the inquiry would be launched on Wednesday. It follows months of pressure on Pelosi to move towards impeachment, but the latest US-Ukraine scandal ultimately tipped the scale.

Still, while the House of Congress is majority Democratic and could vote for impeachment, the Senate is still majority Republican Party.

Analysts believe this means there is little chance of President Trump actually being removed from office, limiting the market uncertainty that drove USD lower yesterday.

Pound to US Dollar (GBP/USD) Exchange Rate Could Still Rise if Upcoming US Data Disappoints

While the US Dollar has done a good job of avoiding big losses on the latest US political uncertainties so far, upcoming US data and further developments in politics could change that.

The impeachment inquiry is not expected to lead to US President Trump’s removal, but if US data continues to disappoint it could worsen US recession concerns.

This would potentially damage Trump’s approval in the run-up to elections next year, and there is speculation that impeachment proceedings could damage them further. According to analysts from MUFG:

‘Heightened political uncertainty in the run-up to the election could further undermine the outlook for business investment and growth in the US, and pose some downside risks for the US Dollar in the year ahead,’

As a result, tomorrow’s US growth rate report, and Friday’s PCE inflation figures, could both influence Federal Reserve interest rate cut bets and the US Dollar if they surprise investors.

The Pound, on the other hand, will focus on potential developments in UK politics and Brexit in the coming days, as parliament reconvenes. This leaves the Pound to US Dollar (GBP/USD) exchange rate outlook dependant on politics.