Sterling has weakened further today, with GBP/USD lurching back down to 1.30 ahead of yet another key parliamentary vote. House of Commons MPs will today be voting on whether to approve a stripped-down version of Prime Minister May’s draft Brexit deal. Specifically they will only be voting on the legally-binding Withdrawal Agreement – the terms and conditions of the UK’s departure from the EU – but will not be voting on the non-legally binding Political Declaration which effectively sets out the terms and conditions of the UK’s new relationship with the EU. Theresa May’s decision to leave the Political Declaration out of today’s vote was seemingly in reaction to mounting evidence that there was still no majority support in parliament for a full Brexit deal which had already twice been voted down. Should MPs vote down the Withdrawal Agreement today, the UK runs the risk of exiting the EU without a deal on 12th April – the new deadline which the EU has set.
The fall in the GBP/USD cross has been exacerbated by the Dollar’s resilience in the past three trading sessions despite US GDP growth being revised down to 2.2% qoq annualised in Q4 from 2.6%. While US government bond yields have fallen sharply to a 15-month low, the Federal Reserve looks comfortable for now in keeping its policy rate on hold whereas some developed central banks are seemingly considering the possibility of easing monetary policy. The Reserve Bank of New Zealand on Wednesday said at its policy meeting that its next move was more likely to be a rate cut than a rate hike and four ECB board members have publicly discussed tiered deposit rates.
