Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Sterling on back foot due to growing concern about no-deal Brexit

ForexJul 22, 2019 08:46PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

By Stanley White

TOKYO (Reuters) - Sterling was on the back foot on Tuesday as investors worried Boris Johnson, the frontrunner to become the UK's next prime minister, would trigger a "hard Brexit" from the European Union, widely seen as a major risk for the British economy.

The euro traded near session lows due to growing expectations European Central Bank President Mario Draghi will signal a rate cut in September at a policy meeting later this week to keep inflation expectations on track.

In Asia, regional currencies were mostly beholden to moves in major global units though investors are watching for any developments in China-U.S. trade negotiations.

The dollar was hemmed in against other major currencies as expectations for a U.S. Federal Reserve rate cut next week sent Treasury yields lower.

Speculation over the likelihood of a no-deal Brexit and questions over how far major central banks will ease monetary policy are likely to set the tone for currency markets in coming weeks, traders and analysts said.

"Johnson is expected to become the new prime minister, so there is a real chance of a hard Brexit," said Takuya Kanda, general manager of research at Gaitame.Com Research Institute.

"In the short-term, further declines in the pound could be limited because positions are already very short. In the medium-term, sentiment for sterling will remain soft."

The pound traded at $1.2477, within striking distance of a 27-month low of $1.2382 reached last week.

Sterling has fallen 3.5% versus the dollar in the past three months due to uncertainty about how Britain will avoid a no-deal exit from the EU.

Britain's Conservative Party will announce the results of a leadership election on Tuesday, with Johnson widely expected to win, setting him up to become prime minister on Wednesday.

There is growing speculation Johnson will pull Britain out of the EU on Oct. 31 without a trade deal in place.

Hedge funds have increased short positions on the pound to a 10-month high in the week to July 16, Commodity Futures Trading Commission data shows.

The euro (EUR=EBS) held steady at $1.1208 as traders awaited the ECB's policy meeting and Draghi's comments at a press conference on Thursday.

Traders see a 43% probability that European policymakers will lower a key deposit rate by 10 basis points to minus 0.50% to combat risk from global trade tensions.

Economists surveyed by Reuters expect the ECB to change its forward guidance to pave the way for a rate cut in September.

The dollar was little changed at 107.91 yen . The dollar index (DXY) was marginally higher at 97.314.

The U.S. central bank is widely expected to lower its target range of 2.25%-2.50% by 25 basis points at a meeting ending July 31, but expectations for a larger 50-basis point cut have waxed and waned due to mixed signals from Fed policymakers.

Sterling on back foot due to growing concern about no-deal Brexit
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Bagger Vance
Bagger Vance Jul 23, 2019 1:54AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Brits need to pull it together and get out and FAST... fix London, yuuuck
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email