Sterling has dropped this week, reversing some of last week’s surge. Traders book profits and investors turn nervous again about the sort of divorce Britain and the European Union will have.
Sterling fell on Tuesday after the opposition Labour party’s finance spokesman was quoted as saying few lawmakers would back Prime Minister Theresa May’s Brexit deal. There was little sign of progress in the government’s talks with Brussels.
Analysts cited comments attributed to Labour’s John McDonnell saying that few Labour lawmakers would support May’s Brexit deal when it is voted on or by March 12, meaning it could be defeated given her lack of a reliable majority.
The pound, mostly flat earlier in the day, dropped 0.6% to a one-week low of $1.3097. It fell half a percent against the single currency to 86.47 pence per euro.
Sterling, one of the best performing major currencies so far in 2019, rose sharply last week as investors bet a no-deal Brexit could be avoided and Britain’s EU exit delayed.
Earlier in the session sterling had been buoyed by data for the UK’s dominant services sector which, while still weak and pointing to an economy close to stagnation, came in slightly better than expected.
If May fails to get her deal passed in parliament, lawmakers will be given a vote on postponing the EU departure date on March 29 to avoid an economically disruptive, no-deal Brexit.
START TRADINGForex – Sterling down hurt by Brexit Deal doubts
Global forex markets were overshadowed by the continued decline in volatility. Further, they lent a boost to higher-yielding currencies such as the U.S. dollar and emerging markets.
The Canadian dollar slumped to nearly six-week lows on Tuesday, hit by a combination of trade troubles, resignations from Prime Minister Justin Trudeau’s cabinet and expectations the central bank could be on the cusp of changing its policy direction. The Canadian currency fell 0.3%, extending Monday’s losses on expectations that the central bank was approaching a policy turning-point.
Elsewhere, the euro held near one-week lows versus the dollar at $1.1318 on expectations the ECB’s Thursday meeting would hint at delaying hiking rates until next year and soon re-launch long-term bank loans to tackle economic slowdown.
The U.S. dollar stood close to a two-week high against key peers at 96.726, supported by higher U.S. Treasury yields. It had rallied on Monday to 96.816, its strongest since Feb. 19.
Sources: Reuters, Investing, CNN money
PLEASE NOTE The information above is not investment advice.