The pound to dollar exchange rate has fallen lower amidst the heightened Brexit uncertainty in what has been described as a political crisis in the UK. Rates for GBP to USD fell last night after Prime Minister Theresa May addressed the nation explaining why a delay to Brexit was necessary whilst telling the public that she is on their side and pointing the blame for this delay at MP’s. Theresa May has said that she will not look to extend beyond 30th June to force MP’s to finally come to a decision on Brexit. The markets are now awaiting details from an EU summit in Brussels that starts today where Brexit is the first issue to be discussed.
It is expected that the EU will offer the UK a small extension but this will be conditional on the withdrawal agreement being passed in the British Parliament. It does make the prospect of a no deal more likely which is keeping pressure on GBP vs USD. We could see high levels of volatility in these coming days as any Brexit developments could have a huge impact on sterling exchange rates. It has been reported that a Meaningful Vote (MV3) should take place next week possibly as early as Monday or Tuesday.
The question is whether the Prime Minister can find sufficient cross party support to get her deal over the line. With a large number of conservative MP’s expected to vote against the deal and would prefer a no deal outcome the vote is likely to go right down to the wire. An emergency EU summit has already been penciled in for this time next week in the event that the deal does not get voted through.
The US Federal Reserve (Fed) held interest rates steady last night as expected although it did give a much more dovish statement suggesting that interest rates are unlikely to be raised again throughout 2019 due to a weaker growth outlook. After what had been a strong end to 2019 the markets had been preparing for a further two interest rate increases in 2019 although this is reported as being unlikely to take place. In fact if anything there is a chance that the Fed may need to cut interest rates at some point due to global growth concerns which are being felt in the US.
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