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

[webfact]

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

By Stanley White

 

FILE PHOTO: A shop assistant counts piles of British Pound Sterling banknotes at an Apple store in London, Britain November 18, 2017. REUTERS/Russell Boyce

 

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 <GBP=D4> 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. <ECBWATCH>

 

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 <JPY=>. 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.

 

Graphic: World FX rates in 2019 - http://tmsnrt.rs/2egbfVh

 

(Reporting by Stanley White; Editing by Sam Holmes)

 

-- © Copyright Reuters 2019-07-23

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[OneMoreFarang]

The Brits get what they want...

(I am sorry for the people who voted remain and who have to live through this. It must be hard.)

[fishtank]

7 minutes ago, OneMoreFarang said:

The Brits get what they want...

(I am sorry for the people who voted remain and who have to live through this. It must be hard.)

Actually it was less than 50% who voted for this nonsence.

As you say not fair on the right thinking majority.

[sammieuk1]

Sterling is on no feet its a basket case junk currency ????

[arithai12]

22 minutes ago, webfact said:

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.

And 7% against the Baht.

[mfd101]

32 minutes ago, fishtank said:

Actually it was less than 50% who voted for this nonsence.

As you say not fair on the right thinking majority.

I sympathize with the 'right-thinking majority' But unfortunately, quite a lot of them didn't vote in the referendum. So tough!

 

The xrate summary at the end of the article makes fascinating scanning. Note the baht in particular.

[edwinchester]

42 minutes ago, fishtank said:

Actually it was less than 50% who voted for this nonsence.

As you say not fair on the right thinking majority.

Not really fair...those that actually bother to turn up and vote determine the election results.

Those who couldn't be bothered to vote can only be assumed to be indifferent to the outcome or have no idea of which would cast that vote.

I'm a remainer btw.

[evadgib]

1 hour ago, edwinchester said:

Not really fair...those that actually bother to turn up and vote determine the election results.

Those who couldn't be bothered to vote can only be assumed to be indifferent to the outcome or have no idea of which would cast that vote.

I'm a remainer btw.

Not to mention the hundreds of thousands who were either disenfranchised by the '15 years abroad' malarchy or who's papers were deliberately withheld, presumably on order from Cameron's Govt, if destined for addresses outside the UK & EU. 

[JonnyF]

It's really started to tank since those Machiavellian Remainers starting plotting to block No Deal. More uncertainty, and FX markets hate uncertainty as does business.

 

The likes of Grieve, Hammond, Stewart etc. should hang their heads in shame. 

 

[Andrew65]

1 hour ago, fishtank said:

Actually it was less than 50% who voted for this nonsence.

As you say not fair on the right thinking majority.

Actually it was around 52%.

 

In 2015 the winning party in the General Election won with 37% of the vote, I didn't hear people asking for a re-run of that one.

[VocalNeal]

Some good news? BAE are throwing their lot in with SAAB to build the Typhoon's replacement. Some good kit the Swedes.

[Chomper Higgot]

9 minutes ago, JonnyF said:

It's really started to tank since those Machiavellian Remainers starting plotting to block No Deal. More uncertainty, and FX markets hate uncertainty as does business.

 

The likes of Grieve, Hammond, Stewart etc. should hang their heads in shame. 

 

It's always somebody else's fault. 

[sanemax]

3 minutes ago, Chomper Higgot said:

It's always somebody else's fault. 

A rather simplistic post .

[Rookiescot]

When Johnson gets the keys to number 10 and we get a hard brexit then Scotland is going to leave the UK.

That will be another 10% off the value of the pound.

[Andrew65]

1 hour ago, arithai12 said:

And 7% against the Baht.

In the last year the Euro/Baht has gone from 39.06 to 34.62, a fall of almost 12%.

[JonnyF]

28 minutes ago, Chomper Higgot said:

It's always somebody else's fault. 

You think the scheming, blocking, delaying of Brexit is helping with business certainty?

 

It would appear to be you who is passing the blame. If Remainers would accept the result of the democratic vote then we could move on. Unfortunately, the losers of this vote cannot accept defeat. They'd rather destroy their own party or in many cases drag down their own country, than accept defeat. They are anti democrats. Only able to accept the result if they win. 

[evadgib]

It'll be Valentines day at the earliest before we have any idea what the future holds post brexit. Until then the gloom-and-doom merchants will have a field day.

[pegman]

9 minutes ago, evadgib said:

It'll be Valentines day at the earliest before we have any idea what the future holds post brexit. Until then the gloom-and-doom merchants will have a field day.

The financial services industry will be packed and long gone by then. Expect ฿29/£1 by V.D.

[VocalNeal]

Does Frankfurt have the same laws as the City of London. I doubt they will go anywhere. It would be like Swiss Banks going to Frankfurt.

[pegman]

31 minutes ago, VocalNeal said:

Does Frankfurt have the same laws as the City of London. I doubt they will go anywhere. It would be like Swiss Banks going to Frankfurt.

You mean the laws the E.U. has keeping their financial services industry within the club? They do but London won't once Brexit takes effect, will it? Dublin, Paris and a few others will be on the inside too.

[welovesundaysatspace]

1 hour ago, JonnyF said:

You think the scheming, blocking, delaying of Brexit is helping with business certainty?

 

It would appear to be you who is passing the blame. If Remainers would accept the result of the democratic vote then we could move on. Unfortunately, the losers of this vote cannot accept defeat. They'd rather destroy their own party or in many cases drag down their own country, than accept defeat. They are anti democrats. Only able to accept the result if they win. 

The one to blame is the government for not tabling an agreement that parliament can agree on, or calling the whole thing off until such agreement has been found. Government clearly is in the lead here, but I doubt a Johnson government will do any better than the May one. You can’t have your cake and eat it, so it’s either pleasing the ultras or protecting the economy and reputation of the country. Both doesn’t work. If it’s the latter, you’ll have to compromise (or campaign until you have enough ultras in parliament). 

[RichardColeman]

If the majority 'remainer' government had acted on what they were instructed to do by the people, there is an argument the pound could be better rather than continuous limbo ! The politicians in the UK are making it worse - not better !

[pegman]

2 hours ago, RichardColeman said:

If the majority 'remainer' government had acted on what they were instructed to do by the people, there is an argument the pound could be better rather than continuous limbo ! The politicians in the UK are making it worse - not better !

That sounds like tabloid rubbish. Try reading The Guardian for a change. 

[soalbundy]

3 hours ago, RichardColeman said:

If the majority 'remainer' government had acted on what they were instructed to do by the people, there is an argument the pound could be better rather than continuous limbo ! The politicians in the UK are making it worse - not better !

and you want to "get your country back" with this shower leading you ?

[Chomper Higgot]

3 hours ago, RichardColeman said:

If the majority 'remainer' government had acted on what they were instructed to do by the people, there is an argument the pound could be better rather than continuous limbo ! The politicians in the UK are making it worse - not better !

Go on then, give that argument.

[SheungWan]

You think the scheming, blocking, delaying of Brexit is helping with business certainty?
 
It would appear to be you who is passing the blame. If Remainers would accept the result of the democratic vote then we could move on. Unfortunately, the losers of this vote cannot accept defeat. They'd rather destroy their own party or in many cases drag down their own country, than accept defeat. They are anti democrats. Only able to accept the result if they win. 

The vote was not for no-Deal but hey! Spin away!

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[SheungWan]

It'll be Valentines day at the earliest before we have any idea what the future holds post brexit. Until then the gloom-and-doom merchants will have a field day.

Pick any anniversary you like.

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[SheungWan]

Does Frankfurt have the same laws as the City of London. I doubt they will go anywhere. It would be like Swiss Banks going to Frankfurt.

You think there are no Swiss banks in Frankfurt?

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[SheungWan]

If the majority 'remainer' government had acted on what they were instructed to do by the people, there is an argument the pound could be better rather than continuous limbo ! The politicians in the UK are making it worse - not better !

Terms of withdrawal and agreement not specified by referendum. Which is why they are the responsibility of Parliament.

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[SheungWan]

That sounds like tabloid rubbish. Try reading The Guardian for a change. 

Isn't The Guardian a tabloid now?

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