GBP/USD Brexit Effects

GBP/USD Brexit Effects

GBP/USD Brexit news

After much debate, a few extensions, and two Brexit-adamant prime ministers, the UK parliament has decided to call for a general election to break the unsolved issues with Brexit. With Brexit put on hold for a few weeks, any sharp movements in the GBP/USD Brexit in the short term would come from the other side of the pound and the dollar.

The world’s most famous pair is facing some changes regarding what is going on in the UK, making the GBP/USD Brexit trio something worth talking about.

The December 12th Election

The December 12th 2019 election could be the only way for the UK to leave the EU, now that the option of a no-deal is off the table. With this, we finally see the UK focusing on something else, that is, election campaigns by the country’s leading parties and then the polls, which would inevitably indicate the direction in which the electorate is heading.

Things look pretty good for Johnson’s conservatives, who are the favourites to win the majority of the votes; this would finally pave the way for the Brexit. However, you can never be sure of how things will turn out. With a lot of time on our hands before the elections, a lot could still change. 

The Polls and the GBP/USD Brexit Consequence

From now until election day, the pound may be stuck at around, or even below, the $1.30 handle as investors watch to see how things pan out. As we approach the December 12th 2019 elections, even with the polls emerging, the currency will remain headline driven. This means that domestic data would take a back seat to political events as things move forward.

Could the Fed’s aggressive cut undermine cable?

Given that the federal reserve system has met the expectations of analysts on interest rates over the past 72 consecutive meetings, an expected 35-basis-point cut is almost certain. The only thing that is not so definite is whether this rate decision would be a dovish or hawkish cut. With some major Federal Open Market Committee officials recently campaigning in favour of no cuts, policymakers might not see the need to ease off in December, even with a reduced amount of manufacturers’ activities. With NASDAQ and S&P hitting record highs, as well as a softening US-CHINA friction, policymakers at federal reserves may decide to pause the rate of cutting cycles.

US macro data to impact the dollar

Another GBP/USD Brexit news highlight is that, during the weeks following Halloween and the rejection of a no-deal Brexit, there would be a release of critical macro data from the US starting with the ADP reports on the payroll. Also, the third quarter advanced GDP estimate would emerge within the same period, which would confirm the deceleration of growth in the UK’s economy. From the analysis, growth is seen to increase by a mere 1.6% on an annual quarter-over-quarter basis. In the same vein, there would also be a handful of macro pointers followed by the essential non-farm payroll reports and eventually the latest manufacturing PMI.

GBP/USD Brexit currency pair scenario dips and drags on the UK construction sector

The uncertainty that accompanies Brexit has taken its toll on the UK construction industry. The political developments in the UK remain the focus of investors and looking at all that is going on in the polls, UK markets are becoming increasingly unstable, especially with the possibility of a hung parliament during the elections.

It is safe to say that the USD/GBP Brexit trio and its outcomes are could still take any turn at any time; this means that we still do not know what will happen. Depending on the level of trust that investors have in how things are panning out with Brexit, it is true to say that many sectors could still be affected. 

The possibility of GBP moving up vs dollar on the conservative majority

At the moment, here is how things appear in the foreign exchange:

Pound – Dollar exchange rate – 1.2809

Pound – Euro exchange rate – 1.1593

This is how things are at the moment, but regarding the GBP/USD Brexit trio, the country’s currency is tipped to rise if the conservatives win. However, the reverse is said to be possible if the results favour the labour party.

We must bear in mind that the chances of the conservatives winning is as low as 40%. The GBP/USD pair under Brexit circumstances – that is, if Boris Johnson wins – would become a force to be reckoned with, meaning that the exchange rates would rise, leaving the economy in a better position than it was before the Brexit elections.

Bottom Line

The state of things in the UK and possible outcomes are still unknown; we have to sit back and wait. The December 12th 2019 elections would, undoubtedly, shed some light on the situation and indicate how investors will react. Until then, whatever happens with regards to market fluctuations will be a result of investors making decisions based on personal convictions. 

The GBP/USD currency pair is one of the most traded pairs in the market today, but now that the GBP/USD Brexit trio has come alive, things do not look so bright for the British economy. Many are still optimistic that the outcome of Brexit will improve the economy, while some still believe that things could worsen as they play out. 

What are your thoughts on Brexit? How do you think it will affect the GBP/USD currency pair? What direction do you think the upcoming general elections will take? Please leave a comment below.

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