Forex trends Wednesday: Sterling should beware of the light at the end of the tunnel

Sculpture by Jimmie Durham, titled ‘Still Life with Spirit and Xitle,’ made of car, volcanic stone and acrylic paint at the Hirshorn museum in Washington, DC. Photo taken July 2018.Sculpture by Jimmie Durham, titled ‘Still Life with Spirit and Xitle,’ made of car, volcanic stone and acrylic paint at the Hirshorn museum in Washington, DC.

When it comes to sterling, any light at the end of the tunnel is bound to be a train.

The British pound/dollar was at 1.2503 at 8:20 A.M. SGT, off the day’s low of 1.2485, after trading in a 1.2478 to 1.2639 range on Tuesday, according to DZHI data. Sterling is hovering around lows last seen in April 2017.

The U.K. Parliament is planning to vote on Prime Minister Theresa May’s Brexit deal before 21 January, Reuters reported, citing her spokesperson. May is currently touring Europe to meet with leaders there, trying to negotiate further and to obtain “reassurances.” 

Reuters reported early on Tuesday Asia time that parliament would hold an emergency debate on May’s decision to delay the scheduled vote on her Brexit deal, which had been expected to fail by a large margin.

May also appeared likely to face a leadership challenge. Some rumblings suggesting another election were also afoot in the background.

“There is no doubt that Europeans want to avoid hard Brexit as much as the Brits given the massively negative ramifications for all involved, but the Europeans are not going to compromise on the sovereignty of the EU trading block and furthermore will be unlikely to offer any additional concessions unless May can assure them that the deal can pass,” Boris Schlossberg, managing director of foreign-exchange strategy at BK Asset Management, said in a note on Tuesday.

Currencies

The U.S. dollar index was at 97.46 at 7:05 A.M. SGT, climbing from as low as 96.89 in Tuesday’s session, according to ICE futures data.

The 10-year U.S. Treasury note yield was at 2.882 percent at 8:16 A.M. SGT, up from as low as 2.852 percent in Tuesday’s session, according to Tullett Prebon data.

The greenback may be seeing some safe-haven flows amid fresh signs of U.S. political chaos.

In an unprecedented clash with U.S. Democratic Senator Chuck Schumer and House Democratic Leader Nancy Pelosi in front of cameras, President Trump openly and aggressively threatened to shut down U.S. government finances if he didn’t receive funding for a border wall. During the presidential campaign, Trump had frequently promised Mexico would pay for the wall.

The euro/dollar was at 1.1328 at 8:19 A.M. SGT after trading in a 1.1305 to 1.1400 range on Tuesday, according to DZHI data.

France eyed as euro falls

French President Macron’s decision to appease protesters with fuel tax cuts and minimum wage increases may also be weighing on the euro, Kit Juckes, a strategist at Societe Generale, said in a note on Tuesday.

“A deficit-growing round of fiscal easing is underway in France. Perversely, this may be good for the euro in the medium term because it gives Italy some much needed company on the naughty step,” Juckes said.

“It may be claimed that President Macron is engaged in much-needed structural reform and Brussels should cut him some slack, but if  there’s acknowledgement that the current environment requires some fiscal accommodation, it can’t hurt relationships between Rome and Brussels,” he added.

The dollar/yen was at 113.428 at 8:20 A.M. SGT after trading in a 112.98 to 113.466 range on Tuesday, according to DZHI data.

The dollar/yuan ended Tuesday at 6.8975 after trading in a 6.8917 to 6.9153 range during the session, according to DZHI data.

The dollar/Singapore dollar was at 1.3725 at 8:21 A.M. SGT after trading in a 1.3713 to 1.3753 range on Tuesday, according to DZHI data.

The dollar/Malaysian ringgit was at 4.1810 at 8:17 A.M. SGT after trading in a 4.1720 to 4.1830 range on Tuesday, according to DZHI data.

The dollar/Indonesian rupiah ended Tuesday at 14,595 after trading in a 14,580 to 14,650 range during the session, according to DZHI data.

 

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