Pound Sterling US Dollar (GBP/USD) Exchange Rate Shakes Off Latest Brexit Debate
As MPs debated Brexit once again the Pound Sterling to US Dollar (GBP/USD) exchange rate recovered some of its lost ground, climbing from its earlier fortnightly low.
Although a sense of uncertainty continues to hang over the political and economic outlook Pound Sterling (GBP) still managed to rally on Friday morning.
However, these gains look fragile thanks to the slim likelihood of the government winning the latest Brexit vote.
While MPs are only set to vote on the proposed withdrawal treaty, without the accompanying political declaration, investors still see limited odds of the vote passing.
The lingering risk of the UK leaving the EU in April without any deal in place leaves GBP exchange rates vulnerable to fresh selling pressure in the days ahead.
Signs of Weaker Inflation Dent US Dollar (USD) Exchange Rates
Demand for the US Dollar (USD), meanwhile, eased in the wake of a disappointing personal consumption expenditure core reading.
As the headline figure unexpectedly eased from 1.9% to 1.4% on the year in January this left USD exchange rates on a generally weaker footing.
The personal consumption expenditure data remains the Federal Reserve’s preferred measure of inflationary pressure, suggesting that policymakers are now likely to see less incentive to return to a hawkish outlook.
With the Fed already looking set to leave interest rates on hold for the rest of the year this sign of easing inflation gave investors fresh incentive to sell out of the US Dollar ahead of the weekend.
USD exchange rates also came under pressure as a result of a fresh bout of market risk appetite, driven by news of progress in the latest round of US-China trade talks.
Although a trade agreement is still yet to be agreed markets still took encouragement from the general resurgence in hopes of a breakthrough.
Pound Sterling (GBP) Vulnerable to Continued Sense of Political Uncertainty
Unless MPs can make some progress towards resolving the Brexit deadlock, though, the GBP/USD exchange rate could struggle to hold onto its latest gains for long.
As long as the risk of a no-deal Brexit persists the Pound looks likely to remain on the back foot, especially if political jitters increase.
With Theresa May’s position as prime minister appearing increasingly fragile the risk of a fresh Conservative leadership challenge or even a general election are also hanging over the domestic outlook.
An ongoing sense of political uncertainty could keep GBP exchange rates biased to the downside in the days ahead, particularly if coupled with a continued lack of Brexit clarity.
The mood towards the Pound may also sour on Monday as forecasts point towards a fresh loss of momentum within March’s UK manufacturing PMI.
Signs of an economic slowdown could weigh heavily on the GBP/USD exchange rate, with confidence in the outlook of the UK economy already limited.