Sterling managed to rise against the US dollar today after Prime Minister Theresa May came out on top in Parliament last night when the ‘Brady’ amendment was passed by a comfortable majority. The ‘Brady’ amendment concerns the Irish backstop and aims to replace it with an ‘alternative arrangement’. Pound investors are relieved that the Brexit deadlock in Parliament has been broken, and now await Mrs May’s hoped-for renegotiations with Brussels over the controversial Irish backstop. The Brexit secretary, Steve Barclay, said: “What we saw in the vote last [night] was a clear mandate to take back to Europe to say this is what Parliament will support.
“What came through in the previous debate is that there is a central concern on the backstop. It was a vote on the deal if this central concern can be addressed.”
Many pound investors, however, are remaining cautious as the EU has previously warned that the Irish backstop is not open for renegotiation – curbing some of Sterling’s gains today.
Today also saw the publication of the UK mortgage approvals figures for December falling against last month to 63.793K, although this was better than expected.
These were followed by the publication of UK lending figures, with consumer credit falling to £0.687bn, indicating that people are tightening their spending.
US dollar traders, meanwhile, will be looking ahead to this evening’s Federal Reserve interest rate decision, in which rates are expected to remain at 2.5 per cent.
The US dollar has failed to gain on the pound today as concern mounts over the economic impact of the recent US government partial shutdown, and with another looming in the weeks ahead ‘greenback’ traders remain skittish.
The ratings agency, Moody’s, said: “If another shutdown occurs, there could be a more severe impact on the US economy than during the recently ended shutdown.”
The pound US dollar exchange rate will remain sensitive to further Brexit developments in the coming week, with Mrs May’s deal now hinging upon Brussels approving changes to the Irish backstop.
Any indication that the EU is unwilling to budge is likely to send the pound into a tailspin, again.