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Pound US Dollar (GBP/USD) Exchange Rate Flounders in spite of New October Brexit Deadline

April 11, 2019 - Written by Frank Davies

Brexit Deadline Extension Fails to Boost Pound Sterling US Dollar (GBP/USD) Exchange Rate

The decision to extend the Brexit deadline until the end of October failed to shore up the Pound Sterling to US Dollar (GBP/USD) exchange rate on Thursday.

Although the UK is no longer at risk of crashing out of the EU without a deal on Friday investors failed to take any particular encouragement from the news.

As the extension was less than the year that EU officials had previously suggested there was some disappointment among investors, limiting the positive impact on the Pound.

With Brexit-based uncertainty set to persist for some months yet to come GBP exchange rates struggled to find any particular support.

US Dollar (USD) Exchange Rates Recover as Jobless Claims Fall

US Dollar exchange rates returned to a positive footing on the back of the latest initial and continuing jobless claims figures.

As both figures saw a surprise improvement on the week this encouraged USD exchange rates to push higher across the board on Thursday afternoon.

Following on from last week’s stronger headline non-farm payrolls report this suggests that the US labour market is continuing to tighten, in spite of weaker wage pressures.

While this is unlikely to be enough to encourage the Federal Reserve to return to a hawkish policy bias the mood towards the US Dollar nevertheless improved.

Steady Consumer Confidence to Offer Further USD Exchange Rate Boost

Further support could be in store for the US Dollar if April’s University of Michigan consumer sentiment index holds steady on the month.

Signs that US consumers are continuing to shake off worries over the unresolved US-China trade spat would give investors fresh incentive to favour the US Dollar over its rivals.

Any fresh deterioration in global market risk appetite may also offer a boost to USD exchange rates ahead of the weekend.

If the Chinese trade balance deteriorates this could encourage the safe-haven US Dollar to make solid gains, with weaker trade set to weigh heavily on the global growth outlook.

Brexit Uncertainty to Keep Pound Sterling (GBP) Exchange Rates Under Pressure

Speculation surrounding Brexit could keep the GBP/USD exchange rate biased to the downside in the near future, meanwhile.

Even with a fresh extension now agreed a sense of uncertainty looks set to keep the UK economy under pressure for some time to come.

As long as MPs remain at odds over the withdrawal agreement and the shape of the UK’s future relationship with the EU the mood towards the Pound is unlikely to see any significant improvement.

However, any suggestions that Parliament is moving closer to agreeing a deal could still give the GBP/USD exchange rate a leg up as markets look for a greater sense of clarity.
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