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Pound US Dollar Exchange Rate News: GBP/USD Flat as Brexit No-Deal Fears Rise

January 30, 2019 - Written by John Cameron

Pound (GBP) Exchange Rates Steadies Following Brexit Debate Losses

The Pound US Dollar (GBP/USD) exchange rate is held just above $1.31 on Wednesday morning as Sterling fought to regain its footing after falling sharply on Tuesday evening.

The GBP/USD exchange rate fell around a cent on Tuesday following a parliamentary debate on Theresa May’s Brexit ‘Plan B’ and a number of amendments tabled by MPs.

The slump came in the wake of MPs narrowly voting to reject an amendment tabled by Labour MP Yvette Cooper, which sought to force the government to delay Brexit is a deal was not approved by parliament by the end of February.

The defeat of the amendment was seen by GBP investors as increasing the risk of a no-deal Brexit as MPs will not have the power to stop the UK inadvertently crashing out of the EU without a deal if parliament cannot agree to exit terms with the EU.

MPs instead gave their backing to an amendment that instructs Theresa May to go back to the EU in an effort to seek an alternative to the Irish border backstop, an outcome that only served to elevate the uncertainty surrounding Brexit.

However despite this, Sterling showed resilience on Wednesday morning as some analysts forecast an extension to Article 50 is unavoidable, despite the rejection of the Cooper amendment.

US Dollar (USD) Exchange Rates Muted as Markets Brace for Fed Rate Decision

Meanwhile the US Dollar (USD) was rangebound on Wednesday morning as markets await the conclusion of the Federal Reserve’s first policy meeting of 2019 later in the evening.

The bank is widely expected to leave interest rates on hold this month, with most economists forecasting that the forward guidance from the bank may be more dovish than it was six weeks ago.

Since striking a surprising aggressive tone as it raised interest rates following its December policy meeting, there has been signs of a dramatic shift within the bank, with most of the communication from the Fed since the start of 2019 being notably more cautious in tone.

On top of this the US government shutdown has delayed the release of some key economic data over the last month, leaving policymakers partly blind on the state of the domestic economy.

Combined with recent signs that both domestic and global growth is slowing, some analysts are forecasting a possible pause in the Fed’s rate hike cycle in 2019, an outcome which is likely to dampen the appeal of the US Dollar going forward.

GBP/USD Exchange Rate Forecast: US Payrolls Also in Sight this Week

Looking past the Federal Reserve’s rate decision, movement in the Pound US Dollar (GBP/USD) exchange rate may be dominated by the release of the latest US labour statistics in the latter half of the week.

Unfortunately for USD investors however, their release on Friday is unlikely to offer much support to the US Dollar, with economists predicting they will show a sizable drop in US payroll numbers as well as a slide in domestic wage growth.

Adding to this pressure may also be the publication of the ISM Manufacturing PMI, which is forecast to show that growth in the US manufacturing sector continued to fall away from its recent highs, potentially stoking slowdown concerns.

Meanwhile GBP investors are likely to remain squarely focused on Brexit for the remainder of this week as May returns to Brussels in an effort to renegotiate the Brexit backstop agreement with the EU.

Outside of this the release of the UK’s own manufacturing PMI may also impact the Pound later in the week, with Sterling likely to soften if growth slowed as forecast at the start of 2019.

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