Sterling remained under pressure today as Boris Johnson’s plans to take the UK out of the European Union on October 31were halted by an unyielding parliament. While the House of Commons approved the Prime Minister’s initial Brexit Withdrawal Agreement bill with a majority of 329 to 299, plans to fast-track the deal were rejected by just 14 votes. EU leaders will now decide whether or not to grant the UK an extension to Article 50 in the hopes of preventing a no-deal outcome at the end of the month.
However, Downing Street insist any extension that drags the Brexit saga into January will see the government push for a general election, a move which could drive Sterling low on deepening market uncertainty.
Meanwhile, the US dollar was left muted today with a lack of economic data placing the emphasis on US-China trade.
US President Donald Trump’s announcement that the efforts of both sides to end the trade war were going well increased market hopes for a resolution next month and saw a return to risk-on moods, with traders turning away from safe-haven currencies like the US Dollar.
At the same time, China’s premier Li Keqiang suggested cooperation would be mutually beneficial and speaking at a meeting with the former US Secretary of the Treasury, Henry Paulson, said:
“On the basis of equality and mutual respect, we can grasp opportunities and focus on our mutual interests.”
Looking ahead to Thursday, September’s US durable goods orders data may place some pressure on the US Dollar if orders decline more than expected, but with the spotlight fixed firmly on US-China trade and an EU response to Brexit any data will have a minimal effect on the GBP/USD exchange rate.