Forex trends Tuesday: Sterling tumbles amid fresh Brexit turmoil

Euro coinsPhoto by Leslie Shaffer

Traders may be singing, “the British pound is dropping and shows no signs of stopping,” and questioning if May will go as sterling tumbled on Monday amid signs the U.K. could be headed for a “hard Brexit.”

The British pound/dollar was at 1.2553 at 8:11 A.M. SGT after tumbling as low as 1.2506 from as high as 1.2760 during Monday’s session, according to DZHI data. That marked sterling’s weakest since April 2017, the data show.

Political turmoil in the U.K. jumped over the latest Brexit snafus, weighing on market sentiment globally. Reuters reported early on Tuesday Asia time that parliament would hold an emergency debate on Prime Minister Theresa May’s decision to delay the scheduled vote on her Brexit deal, which had been expected to fail by a large margin.

Stephen Innes, head of Asia Pacific trading at OANDA, said the Brexit impasse triggered “expansive volatility.”

“The pound plummeted as the market took out two years of pent-up frustration,” he said in a note on Tuesday. “Traders spent the better part of the session remodeling sterling risk around ‘worse case’ scenario — especially, the notion that PM May’s political obituary is penned and the appointment of a new leader who would take a harder line on Brexit is highly likely.”

Currencies

The U.S. dollar index was at 97.19 at 7:04 A.M. SGT, climbing from as low as 96.41 on Monday, according to ICE futures data.

The 10-year U.S. Treasury note yield was at 2.861 percent at 7:59 A.M. SGT after dropping as low as 2.824 percent in Monday’s session, according to Tullett Prebon data.

Euro falls

The euro/dollar was at 1.1353 at 8:11 A.M. SGT after trading in a 1.1348 to 1.1443 range on Monday, according to DZHI data.

“The continuing protests in France are beginning to worry investors, as the continents second-largest economy is in danger of seeing a sharp slowdown in activity as a result of the unrest over the past few weeks,” Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management, said in a note on Monday.

“That’s bad news for the continent as a whole especially if ECB continues on its path to taper which could exacerbate the contraction in demand by tightening credit at the worst possible time,” he added.

The dollar/yen was at 113.192 at 8:12 A.M. SGT after trading in a 112.21 to 113.374 range on Monday, according to DZHI data.

The dollar/yuan ended Monday at 6.9092 after trading in a 6.8732 to 6.9140 range during the session, according to DZHI data.

The dollar/Singapore dollar was at 1.3741 at 8:13 A.M. SGT after trading in a 1.3685 to 1.3749 range on Monday, according to DZHI data.

The dollar/Malaysian ringgit was at 4.1720 at 8:01 A.M. SGT after trading in a 4.1620 to 4.1720 range on Monday, according to DZHI data.

The dollar/Indonesian rupiah ended Monday at 14,550 after trading in a 14,465 to 14,550 range during the session, according to DZHI data.

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