GBP to USD forecast: Rates gain ahead of Brexit legal advice expected today

GBP USD Exchange Rate Slides after GDP Data Shows British Economy Shrank in June 

In today’s GBP to USD forecast we look ahead at the events that could impact rates in the coming days. Pound to US dollar exchange rates have started the week on a higher note ahead of an important week in British politics over Brexit. GBP to USD rates have moved higher, to 1.28. The pound to dollar rate remains extremely volatile and susceptible to Brexit developments. A key meaningful vote on the withdrawal agreement will be held on 11th December and will then set off a chain of events if Prime Minister Theresa May is unable to find the support she needs in Parliament.

Parliament backing for Brexit deal looks unlikely

At present it looks highly unlikely that Theresa May will be able to push this vote through, with so many politicians having stated publicly that they will not back her Brexit deal. If she loses the vote the Government will immediately step up no deal planning and there are a number of different outcomes that then follow. There could be a second vote on the deal within two weeks, but there could also be a change of Prime Minister should Theresa May resign or if there was a vote of no confidence. Whilst the no deal option is a possible outcome which would be seen as negative for the GBP to USD rate, there is also some momentum for a Norway type deal which could change the direction for the pound.

Brexit legal advice expected today

Today will see the British Attorney General Geoffrey Cox make a statement on the legal advice that he has previously given to Cabinet. There is much controversy over what he will in fact actually offer to Parliament today and there have been a number of calls for the full Brexit legal advice to be published. The contentious issue surrounds the Irish backstop which would continue indefinitely and Britain would not have the final say to withdraw from it. Expect political fireworks after he speaks as there could be wider implications for the pound.

USD forecast

Although there has been a small reduction in US Gross Domestic Product for the third quarter the US economy is still proving robust which is helping to support the dollar. It is starting to look like the US Federal Reserve may now slow its rate hike cycle with a pause expected in 2019. The dollar has also weakened slightly following the G20 summit. Any new trade tariffs will be paused for 90 days to allow for more talks. Expect more movement for US dollar rates as trade negotiations continue.

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