Another key Brexit vote will be held in parliament today, with MPs only being asked to vote on the withdrawal treaty and not the accompanying political declaration covering the UK’s future relationship with the EU. Critically, the European Council advised the UK that if the treaty can be approved this week, Brexit can be delayed until May 22nd, while failure to achieve this means the UK will be scheduled to leave on April 12th. Expectations are that the government will again lose this vote, increasing the likelihood of either a no-deal outcome or a lengthy delay. There’s an outside chance that the deal could still be passed if sufficient Labour MPs break ranks, and that would give the Pound a reason to rally. However, today, the original date that the UK was scheduled to leave the EU, the risk for Sterling remains weighted on the downside.
The US Dollar remains buoyant despite yesterday’s shortfall in the revised US Q4 Gross Domestic Product (GDP) reading. Brexit uncertainty is weighing on the Pound and wariness over the severity of any Eurozone economic slowdown is taking a toll on the common currency. With no meaningful developments being seen in the US-China trade talks either, there’s an absence of risk appetite which is combining to fuel demand for the Greenback. As long as the Federal Reserve isn’t forced into a quick interest rate cut, the Dollar’s allure has the potential to last for some time yet.
The Pound recorded its fourth consecutive day of losses against the US Dollar yesterday and also posted its biggest one-day decline in over two weeks. The combination of Brexit uncertainty and support for the US Dollar might cause the Pound to remain in softer territory.
The Euro remains under pressure against the US Dollar, and with the differential in interest rates showing no signs of narrowing any time soon, the common currency is likely to continue to struggle.
Brexit is providing the direction for the Pound against the Euro, so today’s vote outcome is likely to deliver another slug of direction. With the cross sitting in the middle of the range seen over the last month, a significant breakout in either direction is probably to be expected later in the day.