Pound US dollar exchange rate: GBP/USD stalls ahead of key Brexit vote
Theresa May looks likely to lose a meaningful vote tomorrow (Image: -)
The pound is on the defensive against the majority of its peers this morning as investors remain wary of the currency ahead of the tomorrow’s House of Commons vote on Theresa May’s Brexit deal.
While the withdrawal deal has already been signed off by the EU, the PM requires the support of Parliament before it can be formally implemented.
However, Mrs May is widely expected to suffer a crushing defeat in tomorrow’s vote, with Labour, the Lib Dems, the DUP, the SNP and a large portion of the PM’s own party all indicating that they will oppose the deal.
Analysts suggest a defeat for the government will greatly increase the risks of a no-deal Brexit, likely reflecting poorly on Sterling.
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While there have been media reports that the vote may be delayed to provide the government with more time to drum up support for the deal, Downing Street has insisted the vote will go ahead as planned.
At the same time the US dollar is struggling to take advantage of the pound’s weakness this morning as investors remain wary of the currency following Friday’s weak US payrolls figures.
A larger than expected drop in payrolls last month has further fuelled speculation that a rate hike from the Federal Reserve this month may be the last one for some time.
The speculation follows Fed Chair Jerome Powell hinting at a rate pause when he suggested US interest rates were nearing “neutral” levels.
Looking ahead, movement in the GBP/USD exchange rate this week will undoubtedly be dominated by the Commons Brexit vote tomorrow evening, with markets expecting the pound to be hit by considerable volatility whatever the outcome.
However, the publication of the UK’s latest labour figures may help Sterling to edge higher in the lead up to the vote on Tuesday, if wage growth continued its recent uptrend in October.
Meanwhile the focus for USD investors this week is likely to be the release of the latest CPI figures.
These could prompt the US dollar to tumble following their release on Wednesday, if an expected downturn in inflation is seen to further weaken the case for the Fed to continue hiking interest rates in 2019.