Pound exchange rates are recovering in Thursday morning’s European session after Theresa May managed to survive a vote of no confidence last night. However, the margin of victory wasn’t overly convincing, with May winning by 83 votes. Theresa May heads back to Brussels today for talks, but the EU remains firm that there’s no scope for renegotiation.
German Government Minister Stephan Mayer commented:
‘My perception is that Theresa May did negotiate quite well. After one year of negotiations the treaty which lays on the table isn’t too bad for both sides. It is not possible to achieve any better deal than that which is not laying on the table.’
Pound Exchange Rate (GBP/EUR, GBP/USD) Forecast: Pressures Lie Ahead
Theresa May is attempting to gain legal reassurances over the Irish backstop issue in the hope that her deal will be supported by MPs when the time comes to vote on it. With a third of her party showing clear signs of mutiny in last night’s no-confidence vote, it’s likely May has a lot of work to do before her deal will gain enough support.
The continued political uncertainty, the potential threat of a vote of no confidence in the government from other parties, and questions over where Brexit can go next could put further pressure on Sterling exchange rate in the near future.
US Dollar and Euro (USD, EUR) Exchange Rate Forecasts
Meanwhile, the European Central Bank (ECB) is due to gather today for its last monetary policy meeting of the year. Markets hope to see the central bank signal the end of its massive quantitative easing programme, but questions still remain on when the central bank will be able to hike interest rates. Economic data has weakened in recent months, leaving concerns that the Q3 2019 forecast for higher interest rates won’t be met. Therefore, any comments from policymakers that suggest there could be a delay might put some pressure on the Euro exchange rate.
Markets are eyeing the situation in both Paris in Rome regarding budgets, and hopes remain that both parties will be diplomatic as developments continue.
US data releases are in short supply today, but eyes are quickly turning to next week’s Federal Reserve interest rate decision. Expectations that the Federal Open Market Committee (FOMC) will adjust interest rates higher have been increasing somewhat, but there’s still a lot of uncertainty on the matter. US inflation data released in Wednesday’s session saw consumer prices fall in line with forecasts, and if policymakers are feeling particularly dovish, they may choose to hold interest rates.
The South African Rand has been able to firm in this morning’s early trade as risk appetite increased. Expectations for more growth in China and cooling global trade tensions have allowed the South African Rand (ZAR) exchange rate some opportunity to climb.
The Pound to South African Rand (GBP/ZAR) exchange rate is trading at 17.8770. The Pound to US Dollar (GBP/USD) exchange rate is trending in the region of 1.2677. The Pound to Euro (GBP/EUR) exchange rate is trading at 1.1135.