Pound Drops before Brexit Vote, Euro Weakens on Rate Outlook
UK Currency: The sterling came close to its weakest against the USD in more than two years on Tuesday. The weakening was amid increasing uncertainty as British lawmakers prepared to vote on the first stage to block Boris Johnson from pursuing a no-deal Brexit. Read more about the London Vote.
Johnson’s rivals will put forward a vote that would enable them to the clutch control of the parliamentary agenda to try to pass laws that would force him to seek a three-month delay for Brexit. Johnson has clarified that if the government was defeated, it would hold a vote on Wednesday to support an early election, most likely to be held on Oct 14.
On Tuesday, the GBP fell 0.23% to $1.2035 in Asia, having fallen 0.8% on Monday. It was a significant drop in more than three weeks.
The euro held on its Monday’s gain of 0.7% against the GBP to 90.90 pence.
A messy Brexit will certainly weaken the pound, but it could shake other currencies and markets as investors adjust their positions to exit riskier assets.
On Monday, U.S financial markets remained closed for a public holiday. However, in Asia, weaknesses in other major currencies and slight growth in the U.S Treasury yields supported the dollar index to rise 0.22% to 99.284 on Tuesday. Read more about the London Vote
The euro dropped to its weakest in more than two years against the USD. On Monday, a survey showed European manufacturing shrunk for seven months, reinforcing expectations that the ECB would ease monetary policy at a meeting next week. Read more about the London vote.
USD rises higher; Sterling drops on Brexit pressure
On Tuesday morning, the USD continued to increase in Asia to highs not seen since April 2017. Its index was up 0.33% to 99.25.
The rise in the USD matched declines in GBP, which suffered after Prime Minister after Prime Minister Boris asked Parliament to vote against further delays to his Brexit plan for Oct. 31. The GBP/USD pair dropped to 1.2052.
The USD/JPY pair traded up 0.11% at 106.33 by 10.20 PM ET.
The People’s Bank of China set its reference rate for the yuan at 7.0884, compared to the previous 7.1717 close.
The yuan remains weak against the USD, losing its ground and strengthening later. On Sunday, tariffs of 15% on a variety of Chinese imports took effect while retaliatory tariffs from China also kicked in imposing new duties on U.S crude oil.
On Monday, U.S Markets remained closed for Labor Day holiday.
The AUD/USD pair dropped 0.19% to 06700. The NZD/USD pair traded down 0.33% to 0.6286. Australia to decide on the monetary policy on Tuesday.
