Brexit delay does not impress traders

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The pound stumbled below $1.31 on Thursday after a Brexit delay of up to six months did not impress traders. The direction for the British currency cannot be predicted, though few expected wild price swings in the months ahead.

The overnight deal at an emergency EU summit to postpone Britain’s exit from the bloc to Oct. 31 was reached. This means that UK would not crash out on Friday without a treaty to smooth its passage. Prime Minister Theresa May’s request for a shorter delay to June 30 was rebuffed by the 27 EU member states.

Yet the decision failed to bring clarity on when, how or even if Brexit will indeed happen. Conviction bets on sterling rising or falling sharply remain few and far between. The currency remains stuck just below $1.31.

One-month implied volatility – an indication of investor expectations for price movements in the pound – plunged to its lowest levels since August 2018. The three-month and six-month measures were back at January 2018 levels.

That partly reflects the removal of an immediate risk of a no-deal Brexit – which was expected to have hammered the pound.

The pound has been stuck between a range of $1.29 and $1.34 since mid-February, with less volatility than in earlier periods of Brexit-related disarray. On Thursday the pound edged lower to $1.3079, while against the euro it was unchanged at 86.085 pence per euro.

Investors are focused on where the pound is headed after another delay to Brexit.

Forex – Brexit delay does not impress traders

The dollar and euro were little changed on Thursday after the Federal Reserve and the European Central Bank hinted, they were willing to leave interest rates alone amid trade tensions and signs of flagging growth.

Currency markets are waiting for key economic data from China: trade figures due on Friday and first-quarter gross domestic product due next week.

Commodity currencies including the Aussie were also helped by recent gains in commodity prices.

The dollar index last stood at 96.95, flat on the day, after slipping to a two-week low of 96.823.

The euro last held at $1.1278, recovering from Wednesday’s low of $1.12295, keeping intact its slow rise from $1.1183 on April 2.

Sterling traded flat after EU leaders extended the Brexit deadline, suggesting fears remain about where Brexit is headed.

PLEASE NOTE The information above is not investment advice.

Sources: Reuters, Investing, CNN money