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Sterling Bounces Towards Six-week High Against Greenback

Sterling headed towards six-week highs against the greenback on Tuesday as investors continued to cut their short positions, even as the U.K. PM Boris Johnson stuck to his promise to take the U.K. out of the European Union by 31 October.

Experts said traders were proceeding to reverse their guesses against the currency as they cautioned about being caught on the wrong side should the pound further extend a rally it began last week.

A broader weaker greenback also supported the pound in shifting higher Tuesday.

Boris Johnson is required by a law passed this month to ask the EU for a three-month stay on Brexit if a divorce agreement is not approved by Oct. 19; however, British media reported that his team has ways to circumvent it. Johnson stated Monday Brexit would happen on Oct. 31, with or without a deal.

Britain’s supreme court has begun to hear the federal government’s argument that Johnson’s choice to suspend parliament until the Brexit date was not unlawful as Scottish judges ruled last week.

His opponent parties say the suspension was aimed at impeding parliament from stopping a no-deal Brexit, an accusation Johnson refuses.

The currency has firmed over 3% in August, its gains accelerating after parliament passed the law ruling out no-deal Brexit. It hikes 1.3% last Friday, grasping at a headline — later denied — that Johnson’s Northern Ireland allies might soften their Brexit stance.

Pound Monday hit a six-week high of $1.2515. The currency was struck by the volatile greenback, which surged late on Monday as oil prices eased and trade strains with Japan appeared to cool.

Traders are now bracing up for the U.S. Federal Reserve’s policy meeting this week.

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Currencies News

Sterling Rallies for Second Day as Brexit Without Deal Worries Retreat

The sterling rallied to a one-week high on Thursday after legislators voted to force PM Johnson to seek a three-month halt to Brexit if he failed to secure a divorce agreement with the European Union.

Political ambiguity remained high — Johnson renewed his efforts to seek an election next month after a first try was defeated Wednesday — however, market spectators were relieved that at least a no-deal Brexit seemed to be avoided.

The British currency advanced 0.4% to above $1.23, its highest since Aug. 28 and building on an overnight 1.4% hike, its steepest one-day jump since March.

Investors have ignored the pound in recent times as concern grew that Britain would crash out of the EU with no deal. On Monday, it dropped to below $1.20.

UBS analysts said a pause to Brexit until January 2020, and an election after October could drive the pound as high as $1.30, a four-month high.

The rally reverberated through the derivative markets as well. Two-month implied levity marks for pound options, which cover the Oct. 31 deadline for Brexit, fell. The slump in expected price swings for the pound indicated markets were loosening extreme short-period destructive bets.

Despite the rebound, the British currency remained over 8% below March’s 2019 highs of almost $1.34, on worries an election is the only method to break the political impasse.

“Nonetheless, with the outcomes from any election so hard to forecast and the problem of still fixing on a deal, we predict further pound rallies are likely to be limited until we have clarity on a result,” said John Marley, a senior FX consultant at FX risk management specialist.

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Easing Political Fears in Europe Pound Surges, Global Stocks Rise

Britain’s pound jumped from three-year lows Wednesday after a parliamentary vote raised the prospect of another delay to Brexit while an easing of concerns about political risk in Italy further helped push world shares higher.

Global stocks surged 0.4% by 0821 GMT, as Europe returned 1.1% and after a good session in Asia following a report showing that development in China’s service sector stimulated despite broader economic headwinds.

Reports that Hong Kong will declare the withdrawal of an extradition bill that sparked months of protests, throwing the Chinese-dominated city into its worst crisis in a long time, also caused relief.

British legislators defeated Boris Johnson on Tuesday in a proposal to block him from taking Britain out of the European Union without a deal, prompting the PM to declare that he would immediately push for a snap election.

On Wednesday they will urge to approve a law forcing Borris Johnson to ask the European Union to postpone Brexit until Jan. 31 unless he has an exit deal accredited by parliament beforehand.

UK developments boosted the pound 0.56% to $1.2155 after skidding Tuesday to its lowest since October 2016.

The dollar index against a basket of six leading currencies was firm at 98.803 after rising overnight to 99.370, its highest level since May 2017.

The index lost ground on Tuesday after knowledge showed the U.S. manufacturing sector contracted in August for the first time since 2016, a reading that in turn has cemented expectations of further policy easing by the Federal Reserve.

The euro climbed to $1.0987 after slipping to a 28-month low of $1.0926 overnight as traders strengthened for a possible interest rate cut by the European Central Bank subsequent week.

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Currencies News

Pound Skids Below $1.20 As Election Warning Contributes to Brexit Woe

Sterling plunged below $1.20 on Tuesday to its lowest in three-years, as Prime Minister Boris Johnson’s tacit ultimatum to legislators to support him on Brexit or face an election sent traders scrambling to drop British assets.

The pound, which has lost 20% of its value since Britain voted to leave the European Union in 2016, plunged to as low as $1.1959, down almost 1% on the day.

Banning an October 2016 ‘flash crash’ when sterling immediately tanked to as low as $1.15, the British currency has not usually traded at these levels since 1985.

Investors in London stated it was the heightened ambiguity that was panicking them.

Many fear that Britain will either crash out of the bloc on Oct. 31 without a transitional contract to ease the divorce or face a parliamentary election that would sow more unpredictability at a time when the country’s economy is already declining.

The battle over Brexit is reaching a crescendo this week. Johnson on Monday implicitly warned legislators he would seek an election if they tied his hands on Brexit, ruling out ever allowing a further delay to Britain’s departure from its largest trading associate.

Council members will vote on Tuesday on the first stage of their plan to dam Johnson from pursuing a no-deal Brexit ahead of the Oct. 31 deadline.

Banks raised their views for the likelihood of a no-deal Brexit. UK domestic-focused shares such as housebuilders slipped on concerns about a blow to the British economy.

Against the euro, the pound’s slump was far more contained on Tuesday, falling to a two-week low of 91.47 pence before recovering considerably.

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Currencies News

Pound Receives Some Support but Brexit Worries Keep It Close to Lows

The British pound increased barely on Tuesday to hold above new lows although it remained weak as investors still fear that Britain is headed for a no-deal Brexit.

Sterling hit a brand new 23-month low against the euro in a single day, with the losses down to strength in the single currency instead of more Brexit-linked fears.

A newspaper reported late on Monday that Brussels diplomats briefed after a meeting with British PM Boris Johnson’s chief European diplomat said it was clear Johnson had no purpose of renegotiating the departure settlement.

Johnson has mentioned Britain will leave the European Union on Oct. 31 with or with no deal.

The voltality of a no-deal Brexit in October has risen in recent weeks under Johnson’s regime, beating the pound to its lowest in more than two years.

On Tuesday, sterling climbed 0.3% versus the greenback to $1.2173, away from the 31-month low of $1.2080 hit last week.

Against the euro, the pound gained from a nearly 2-year low of 92.49 pence to touch 92.06 pence, up 0.2% on the day.

“In the run-up to the Brexit deadline at end-October, we count on EUR or GBP to remain volatile and maybe more than we previously expected. Financial markets are taking Boris Johnson’s direct approach literally and, in the run-up to October, this might mean EUR or GBP will float higher,” Danske Bank analysts stated, foretelling sterling could go to 97 pence.

“Our base case proceeds to be a much less dramatic consequence at the end of October. We wish EUR or GBP to settle at 0.89-0.91 (89 to 91 pence per euro) on the back of addition or snap election,” they added.

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Currencies News

Sterling Drops to $1.21 As BoE Reduces Growth Estimates Before Brexit

Sterling dropped to a 30-month low on Thursday below $1.21, hurt by a stronger greenback, resumed worries about a no-deal Brexit and reduced Bank of England forecasts for British economic progress.

The pound declined to a low of 1.2085, its lowest since January 2017. It came after the U.S. Federal Reserve’s less dovish than expected policy meeting on Wednesday pushed greenback buying, and prior to the BoE kept rates of interest on hold; however, lowered its growth forecasts amid mounting Brexit dangers.

The pound shed over 4% of its value in July, its worst month since October 2016, following new Prime Minister Boris Johnson’s pledge to depart the European Union on Oct. 31 whether or not a transition settlement can be agreed with Brussels.

This triggered panic among traders that Britain was on track for a chaotic divorce after 46 years in the world’s largest trade bloc.

On the Bank of England’s trade-weighted index, which measured versus its trading partners’ currencies, the pound has declined to its lowest since early November 2016, having dropped over 7% since May.

The BoE kept rates on hold at 0.75% on Thursday; however, gave no hint it was contemplating paring interest rates like other central banks.

The pound was little influenced by the declaration, hovering around the $1.21 mark.

BoE Governor Mark Carney said “profound uncertainties” over the future of the world trading system, and Brexit were weighing on UK economic efficiency.

The BoE estimates assume Britain shuns a Brexit shock, but it nonetheless reduced its growth forecasts to 1.3% for 2019 and 2020, down from 1.5% and 1.6% respectively in its last projections in May.

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Currencies News

Sterling Plunges to $1.22, Costs Rising Possibility of No-Deal Brexit

Sterling fell to 28-month lows on Monday and headed for its greatest daily dip versus the greenback since November as traders scrambled to factor in the risk of a no-deal Brexit and the possibility of a fastening election.

A still-deeper sink in sterling stays on the cards; all metrics show that a disorderly British exit from the European Union is far from being fully valued in.

While most traders have until now wager on a last-minute deal to avert a tough Brexit, that expectation is shrinking under new Prime Minister Boris Johnson.

Sterling losses quickened after it violated a critical psychological level of $1.23 and Johnson repeated that while he wanted to reach a brand new trade agreement with the EU, the UK would exit the bloc on Oct. 31 with or without a deal.

By 1600 GMT it was down 1.3% at $1.2229 after knocking $1.2213 earlier, its lowest since March 2017. Versus the euro, the pound reached 91.16 pence, its most decrepit since September 2017.

“All the stops are out, and the pound is now in free fall,” Neil Wilson, an analyst at online brokerage Markets.com, stated, adding the pound may drown to $1.21 if the $1.22 level was breached.

The British government mentioned Monday it assumed there would be a no-deal Brexit as a result of a “stubborn” EU was declining to renegotiate their divorce.

The 27 other EU representatives have repeatedly said the divorce settlement shouldn’t be up for discussion.

Adding to the pound’s works is the possibility of an early parliamentary election. The Conservative Party has surged in opinion polls since Johnson became chief, per YouGov, which confirmed support for the party at 31%, well above the opposition Labour Party.

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Currencies News

Yen Modifies Bit as BOJ Holds, Spotlight Moves to Fed Meeting

The yen was little modified against the greenback on Tuesday, trading near a three-week low after the Bank of Japan left monetary policy on hold as anticipated, and as traders cut expectations for aggressive rate cuts from the U.S. Federal Reserve.

The BOJ left its massive asset-purchase plan, and forward guidance maintained at a monetary policy meeting on Tuesday. Governor Haruhiko Kuroda could provide further clues on coverage at a press conference from 0630 GMT.

Against a box of six leading currencies, the greenback traded close to a two-month high.

The Fed is predicted to cut rates by 25 basis points Wednesday, and buyers are awaiting whether the shift may be a one-off or the first in a series of various cuts, as many investors are anticipating.

The pound hit a new 28-month low early in Asia trade as traders became more and more nervous about the prospects of a no-deal Brexit under late British PM Boris Johnson.

Monetary policy is prone to set the tone for currency markets in upcoming months as central banks from Australia, New Zealand, Europe and probably Britain are anticipated to cut rates as a consequence of low inflation and risks to world financial growth.

The yen JPY=EBS was quoted at 108.740 per greenback, little modified on the day. The yen dropped to a three-week low of 108.950 early in Asian trading.

The Japanese currency trimmed its losses and edged a tad higher against the greenback after the BOJ’s decision; however, the shift quickly faded.

The BOJ, as anticipated, maintained a pledge to guide short-interval rates of interest at -0.1% and the 10-year bond yield around 0% through aggressive bond investments.

The BOJ further stated it would improve stimulus “without hesitation” if needed; however, investors have repeatedly said that in contrast with other leading central banks, the BOJ has limited options in hands.

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Currencies News

Sterling Clung Near $1.25 As New PM Boris Adheres to Brexit Standing

Sterling traded below $1.25 on Thursday, little modified, after new Prime Minister Boris Johnson stuffed his cabinet with Brexiteers and vowed he would take Britain out of the European Union on Oct. 31 with or without a transition deal.

Johnson met his Brexiteer-dominated group of senior ministers for the first time on Thursday to plan the best way to persuade the EU to agree to a brand new withdrawal opportunity.

He informed parliament that the Irish border backstop must be struck out of the divorce settlement if there was to be a dignified exit with a deal.

Johnson’s victory in the Conservative Party management contest was priced mainly into sterling. It has lost over 5% of its worth since early May and recently hit a 27-month low against the greenback and a six-month low versus the euro. A small restoration since was triggered mostly by profit-taking from traders who had shorted the currency.

Attention now shifts to whether Johnson will comply with through on his rhetoric about making an attempt to extract more concessions from the EU, and taking Britain out of the EU in October without an agreement if he can’t achieve that.

The EU has so far repeatedly said it is not going to rewrite the departure deal, but it surely has mentioned it may change a so-called political announcement on future connections.

Against a euro that bounced across the board after the European Central Bank was not as dovish in its financial policy position as some had anticipated, the pound slid 0.3% to 89.485 pence.

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Currencies News

Pound Rebounds as Johnson Assumes Office

Johnson assumed office as prime minister pledging to implement the result of the 2016 Brexit poll and take Britain out of the European Union on Oct. 31 with “no ifs or buts.”

That could pitch the country into a showdown with the EU and trigger a constitutional crisis at home, as many legislators have vowed to bring down any government that tries to push a no-deal Brexit.

UK financial information has further been sad in recent months, with a recession seen likely.

However, the pound rose as much as half a percent on Wednesday versus the greenback GBP=D3 and advanced to a three-week high against the euro EURGBP=D3 as traders reduce some extreme brief bets in opposition to the British currency.

Jordan Rochester, a strategist at Nomura, mentioned the pound’s move was a traditional “buy the hearsay and sell the fact” price action with traders cutting a few of their net brief positions in sterling anticipated to be nearly $6 billion.

Claire Dissaux, chief of global economics and strategy at Millennium Global Investments, stated Johnson would likely end up with a tough Brexit through a ‘Canada-plus’ type of trade settlement, which would be destructive for the economy and the pound.

Sterling stands lower than half a percent off the 27-month low it hit just lately against the greenback. It plunged 0.5% at $1.2495. In opposition to the euro, it further rose 0.5% as the single currency declined to a three-week low.

In the currency derivative markets, dryness measures remain high, with three- and six-month suggested buoyancy at the highest since April.

ING analysts stated Johnson faced a dispute with a split parliament over the no-deal situation.