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British Pound at Weakest Level in History

By:
David Frank
Updated: Oct 13, 2016, 07:07 UTC

The British Pound drop continues against its major Forex trading partners despite reports that British Prime Minister Theresa May has accepted that

British Prime Minister Theresa May has accepted that parliament will vote on her plan to leave the European Union

The British Pound drop continues against its major Forex trading partners despite reports that British Prime Minister Theresa May has accepted that parliament will vote on her plan to leave the European Union. In other words enact Article 50 to begin final divorce proceedings by March 2017. More than half of the British ministers are seen as pro- European Union (EU). Their involvement in this matter should now be avoided as the United Kingdom wishes to separate their market from the EU. There were fears of problems, a rupture in parliament after the Conservative Party Conference last week.

On Tuesday, the British pound touched historic low level against global major currencies. Today, the pound is trading at 1.2142, -0.16 against the greenback while against the Euro the pound continues to trade at six year low level at 0.9052.

Theresa-,May

There is a relatively quiet economic calendar in Europe, once again today. This will put the crosshairs on oil inventories out of the United States and should have an impact not only on the price of crude oil today, but on commodity currencies like the Canadian Dollar. More specifically the USD/CAD Forex pair could see some volatility.

Yesterday, there was an unexpected fall-off in risk-oriented markets from the S&P 500 to the emerging markets as well as Japanese yen crosses. If traders were looking for a de-leverage theme to gain traction yesterday, that opportunity never came along. Sentiment is not the only game in town but it is being rendered ineffective at this time. There are some high profile technical setups emerging that should be watched. Should those be achieved, then that could be sufficient enough catalyst to break asset classes from their trade ranges. Looking at US equity indices, there is a lot if indecision and this will be gauged for how long range trading will last. Alternatively, there is the USD/JPY Forex market. There could be a trend change should it close above ¥104.10 on a daily closing basis.

There has been one currency that has done very well as of late. It has shirked a lot of major crosswinds and done relatively well over the last few weeks. We are talking about the US Dollar. The Federal Open Markets Committee (FOMC) minutes, released yesterday, had some nice hawkish blurbs that support a rate hike should be coming before the end of the year. According CME Fed Watch Tool, chances for a rate hike in December stands on 64%.  As the Dollar is rising, hawks were going over the minutes and headlines that fell on statements that the last monetary policy meeting of the FOMC was a “close call.” This is leading traders to believe in a rate hike happening before the end of the year and most likely in December.

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