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Forex - Pound Trades Flat Following May’s Brexit Vote Defeat

ForexJan 15, 2019 11:49PM ET
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Investing.com - The British pound traded flat on Wednesday in Asia after U.K. Prime Minister Theresa May’s Brexit plan was voted down by a hefty margin.

The GBP/USD pair last traded at 1.2857 by 11:44 PM ET (04:44 GMT), down 0.01%. The pair was down close to $1.27 before the vote but pared losses following the large defeat. According to various media, some traders now believe the outcome could either delay Britain’s March 29 departure date or bring about a second referendum that could end up cancelling Brexit.

On Tuesday, the House of Commons voted 432 versus 202 against Prime Minister May’s Brexit Deal. Following the defeat, May now faces a confidence vote in Parliament later today.

"While the margin of May's loss was a surprise, the defeat itself was something the market had been pricing in for a long time and it appears that participants covered shorts in the pound after the vote," said Yukio Ishizuki, a senior currency strategist at Daiwa Securities, in a Reuters report.

"The market is now factoring in the March Brexit deadline being extended. In the longer run it may boil down to two scenarios - a no-deal Brexit or no Brexit at all,” Ishizuki added. "The market is now factoring in the March Brexit deadline being extended. In the longer run it may boil down to two scenarios - a no-deal Brexit or no Brexit at all."

Meanwhile, the USD/CNY pair traded 0.2% higher to 6.7689. The People’s Bank of China injected CNY 560 billion in the system on a net basis via reverse repo operations, its biggest daily net cash injection on record.

The injection was to maintain "reasonably ample" liquidity in the banking system, the central bank said in a statement on its website.

"The banking system's overall liquidity is falling rapidly,” it said.

The move came one day after Chinese officials signalled that they would roll out more stimulus measures in the near-term.

Chinese Premier Li Keqiang said the government would help the country to meet its economic goals for 2019, while the National Development and Reform Commission said it would aim to achieve “a good start” in the first quarter.

The central bank set the yuan reference rate at 6.7615 today vs the previous day's fix of 6.7542.

Elsewhere, the U.S. Dollar Index that tracks the greenback against a basket of other currencies slipped 0.1% at 95.583.

The USD/JPY pair fell 0.2% at 108.47. The AUD/USD pair was little changed at 0.7196.

Forex - Pound Trades Flat Following May’s Brexit Vote Defeat
 

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