However, this failed to offer much benefit to the GBP/USD exchange rate as economists raised concerns over the state of the UK labour market. Howard Archen, an Economist at EY Item Club, offered a sentiment shared by many analysts: “The suspicion has to be that the labour market will falter further in the near term at least as companies worry about the very real possibility of a “no deal” Brexit at the end of October, an unsettled domestic political environment and a challenging global economy.”
Brexit uncertainty returned as an unyielding British government affirmed their determination to honour the October 31 Brexit deadline, despite a legislative bill – passed into law last night – designed to force their hand in seeking a deadline extension.
Prime Minister Boris Johnson offered a willingness to negotiate a deal with the European Union, but added he is “prepared to leave without one”.
Consequently, Sterling traders are increasingly jittery as the spectre of a no-deal outcome in little over a month returns to haunt UK markets.
Meanwhile, the US dollar remains under pressure ahead of next week’s expected rate cut from the US Federal Reserve. This follows Monday’s decline in the New York Fed’s consumer inflation expectations in August, which fell from 2.59 percent to 2.41 percent, a rate persistently short of the Fed’s 2 per cent goal.
Analysts at Reuters commented: “Officials are divided on whether a rate cut is needed at a time when the unemployment rate is near a 50-year low and consumer spending is strong.”
The pound to US dollar exchange rate could see some light at the end of the tunnel if Boris Johnson successfully negotiates a deal with the European Union, but investors remain doubtful this will transpire given the British premier’s hard-line stance on Brexit and his refusal to comply with legislation.