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GBP USD Exchange Rate Soars as High Court May Allow MP ?Brexit? Vote

October 19, 2016 - Written by Minesh Chaudhari

The GBP USD exchange rate skyrocketed today following the news that High Court lawyer appointed by the government said that the British parliament would have to ratify any potential ‘Brexit’ deal ahead of EU negotiations.

Pound (GBP) Bludgeons US Dollar (USD) Following High Court Decision



The Pound (GBP) advanced by around a cent against the US Dollar (USD) overnight following a report from the High Court, which said that the UK government may not be able to have the final say in ‘Brexit’ negotiations after all, as a High Court lawyer said it was ‘very likely’ that MP would be to vote on the terms of how the UK will split from the EU.

This will help alleviate investor anxiety that a ‘hard Brexit’ was unavoidable. As recent rhetoric from members of the UK government indicated that Britain may surrender access to the single market in exchange for greater controls over inflation.

With many opposition MPs opposed to the government’s ‘Brexit’ plans the news that they may be allowed to vote has helped to reverse some of the negative market sentiment towards the Pound and produced the first notable gains for the currency in nearly a month.

US Dollar Pound Exchange Rate Pressured by Inflation Data



The US Dollar also softened against the Pound earlier in the day following the release of September’s UK consumer price index which rose to 1.0% just nudging past predictions of a 0.9% rise.

While a healthier increase in inflation was welcomed, economists have warned that UK inflation could spiral out of control in 2017 when the low value of the Pound begins to impact retailers as their currency hedges taken out when Sterling was far stronger come to an end.

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The US also released their own CPI data yesterday. While unable to beat expectations, it still saw a significant rise to 1.5% in September from 1.1% in August, but struggled to make any impact on the Pound as it continued to rise following the High Court news, adding further evidence that Sterling has now become a politicised currency in which political mumbling has a larger impact on the currency than data.

GBP USD Exchange Rate Forecast: Is the Pound Recovery Likely to Hold with Employment Remaining High?



The Pound was also bolstered by today’s UK Employment data as the unemployment rate remained fixed at 4.9% as predicted, with the employment rate holding at a record high.

The US Dollar could may pressure Sterling later this afternoon when US housing data is released as housing starts are expected to surge 2.9% in September after falling -5.8% the month before. However if the recent trend of disappointing US data continues then the Pound may find itself able to build further on its recent gains.

Current Interbank Exchange Rates



At the time of writing the GBP/USD exchange rate was trending around 1.22 and the USD/GBP exchange rate was trending around 0.81.
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