Pound’s Fall Mitigated, Even As Brexit Uncertainties Set To Drag On

Asian stocks are mixed after US equities posted declines, as Brexit risks took hold of market sentiment in the absence of other major catalysts.
Han Tan

With investors keeping risk appetites in check, most Asian currencies are weaker against the US Dollar, but are gaining versus the Pound. Gold is inching towards the $1490 psychological level, while 10-year US Treasury yields extended yesterday’s declines to drop below 1.75 percent at the time of writing.

GBPUSD returned to sub-1.29 levels after the UK Parliament blocked Prime Minister Boris Johnson’s pledge to deliver Brexit by October 31. However, the much-feared no-deal Brexit now appears a lessened prospect, hence the mitigated drop in Sterling.

Despite Parliament agreeing to the general principles of PM Johnson’s Brexit deal for now, the exact date for the UK’s departure from the EU is still up in the air. There appears to be ambitions among MPs to improve on the deal in hand, which could still sway the political support for the deal either way. The longer runway that’s been accorded this Brexit saga also means that investors may have to contend with more political risks by way of a UK election. Given the various potential political outcomes, future gains for Sterling are not assured, with politically-driven volatility set to be a recurring theme for GBPUSD.

Incoming US economic data to help stabilise Dollar

The Dollar index (DXY) gained 0.3 percent and climbed back above its 200-day moving average, aided by the Pound’s drop, with Sterling playing its role as the primary driver for DXY in recent days.

The Greenback could see more support over the coming days, provided the incoming US economic data such as factory orders, jobless claims and consumer sentiment do not stray too far from market expectations. Investors are now forecasting a 91.5 percent chance that the Federal Reserve will lower US interest rates by 25 basis points next week. A signed US-China trade deal in November may take some pressure off certain sectors of the US economy, which could allow the Fed to back away from further policy easing after this month.

Deeper OPEC supply cuts could lift Oil prices onto higher plane

Brent futures briefly breached $60/bbl before moderating, following a report that OPEC producers are mulling deeper supply cuts at their next meeting. Considering that US shale output remains at record levels while global demand is expected to wane next year, tighter OPEC production would be welcomed by Oil bulls as such a move may translate into higher prices for Brent.

Brent has not been able to take full advantage of the weaker Dollar this month, when comparing its meagre 0.3 percent month-to-date rise versus the Dollar index’s 1.9 percent decline during the same period. Oil continues to be weighed down by dogged concerns over diminishing global demand, and will need all the help it can get if prices are to climb meaningfully higher.

Open your FXTM account today

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.