Pound Sterling US Dollar (GBP/USD) Exchange Rate Stalls over Johnson’s Election Plans
Boris Johnson’s latest attempt to push approval for a general election through parliament saw the Pound Sterling to US Dollar (GBP/USD) exchange rate stall.
With Labour showing little appetite for an election Johnson threatened to pull his Brexit deal if MPs failed to approve his motion, provoking a fresh bout of market anxiety.
As Johnson’s move also led to EU leaders postponing their expected announcement of an approved Brexit deadline this left Pound Sterling (GBP) on the back foot.
With less than a week left before the current Brexit deadline the prospect of prolonged uncertainty weighed heavily on GBP exchange rates, adding to concerns over the economic outlook.
While the odds still point towards an extended Brexit deadline, in spite of these developments, investors lacked the incentive to support the Pound on Friday.
US Dollar (USD) Upside Limited as Markets Brace for Federal Reserve Action
Even so, the US Dollar (USD) struggled to capitalise on its rival’s weakness ahead of the weekend as markets continued to brace for the upcoming Federal Reserve policy decision.
Although the odds of an imminent interest rate cut are already effectively priced into USD exchange rates investors maintained a relatively bearish view of the US Dollar on Friday.
Given increasing worries over the resilience of US growth in the face of a global slowdown the Fed looks set to enact further monetary loosening, in spite of an increasing divide among policymakers.
With no change forecast for October’s finalised University of Michigan consumer sentiment index USD exchange rates could struggle to find any support ahead of the weekend.
However, an improvement in September’s budget statement may put an additional dampener on the GBP/USD exchange rate.
If the budget returns to a state of surplus, reversing August’s deficit, this could encourage a greater sense of confidence in the US economic outlook.
Pound Vulnerability to Persist Without Clarity over Brexit Deadline
Until the EU officially offers the UK an extension of the Brexit deadline GBP exchange rates look set to remain under pressure.
As long as a sense of uncertainty over the UK’s future relationship with the EU persists the potential for Pound Sterling gains appears limited.
The mood towards the Pound may also sour on Monday if October’s CBI distributive trades index sinks further into negative territory.
Fresh evidence of a slowdown within the UK industrial sector is likely to weigh heavily on the GBP/USD exchange rate as the odds of a weaker gross domestic product reading grow.
If signs continue to point towards lacklustre economic growth and activity, reflecting a greater sense of Brexit-based anxiety, support for the Pound could prove limited.
On the other hand, a more resilient report may offer the GBP/USD exchange rate a temporary rallying point, even in the face of ongoing political uncertainty.