November 30, 2022

Brexit Plans: Another obstacle for May> Forex Highlights

Brexit plans: Another obstacle for May

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UK Prime Minister Theresa May’s government faces another obstacle: the latest parliamentary vote on her Brexit plans.

On Monday May narrowly won a vote after deciding to accept the demands of pro-Brexit lawmakers. On Tuesday she will try and win a vote another vote, on trade. However, newspaper reports said the opposition labour party was seeking to join forces with members of May’s own party angered by her acceptance of pro-Brexit lawmaker demands.

While most traders believe Britain foresee a soft Brexit, the pound remains highly sensitive to political uncertainty.

Further, BoE Governor Carney said on Tuesday that a no-deal Brexit would have “big” economic consequences such as prompting a review of interest rates.

FED Chairman Powell’s first congressional testimony

Traders focus on Fed Chairman Powell’s first congressional testimony on the economy and monetary policy. Powell will testify on the economy and monetary policy before the U.S. Senate Banking Committee at 1400 GMT on Tuesday. A testimony at the same time on Wednesday to the House of Representatives Financial Services Committee will follow.

It is expected to reiterate the Fed’s stance towards gradual monetary policy tightening. However, market focus will be on his views on recent trade tensions and whether they affect the outlook for the tightening. Traders and investors expect him to signal optimism on growth and inflation. Any suggestion of caution on trade could make a difference to the market’s appetite for risk.

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FOREX MARKETS

The dollar traded flat against its major-traded rivals, below a one-year high amid concerns that U.S. economic momentum could peak soon.

The greenback increased 0.2 against the Yen at 112.50 yen, close to last week’s 6-month high of 112.80 yen.

The Australian dollar fell 0.2%. The currency is down more than 5 percent since the start of the year. A divergence in the interest rate outlook of the U.S. Federal Reserve and Australia’s central bank, which is seen keeping policy steady for some while yet, is to blame for this fall.

The Sterling sank a full cent from its earlier high, trading down 0.7% at $1.3145. It also fell heavily against the euro at 88.96 pence per euro, half a percent lower on the day.

The euro added 0.1 percent to $1.1720 after weakening half a percent last week.

Oil hit a three-month low on Tuesday as concerns over supply disruptions eased. The focus moved to increasing production and potential damage to global growth from the U.S.-China trade dispute.

Sources: Reuters, CNN money, the guardian

PLEASE NOTE The information above is not investment advice.