Forex – Sterling Drifts Lower as May Prepares 3rd Brexit Vote
Investing.com — The British pound is drifting lower against the dollar and euro early Friday in Europe, consolidating this week’s gains as the market takes stock of a tumultuous few days in the Brexit process.
Prime Minister Theresa May is preparing to ask lawmakers to vote on her twice-defeated Withdrawal Agreement with the EU for a third time next Wednesday, the BBC reported Friday. She’s hoping to convince die-hard Brexiteers in her own party that – since there is no majority in parliament for leaving without a transitional deal – her deal is the best option left to them.
May’s government held on to control of the Brexit process by a whisker Wednesday, defeating by only three votes a motion that would have let parliament take control. As such, most analysts still see her deal – or a rough version of it – as the most likely outcome, even if it comes with a slight delay.
However, a disorderly ‘no-deal Brexit’ is still the legal default option, meaning that that tail risk still exists, unless the EU changes its stance. Against that backdrop, the pound is set to end the week around 1.2% higher against the euro and over 2% higher against the dollar.
At 03:00 AM ET (0800 GMT), GBPUSD was at 1.3226, down 0.1%, while GBPEUR was at 1.1675, down 0.3%. The dollar index, which measures the greenback against a basket of six major currencies, was down 0.2% at 96.605.
Overnight, the yen had barely moved after the Bank of Japan downgraded its outlook for the Japanese economy this year, but announced no new stimulus measures to support it. USDJPY was little changed at 111.67.
Risk appetite was also dented by comments from Treasury Secretary Steven Mnuchin that the proposed summit between U.S. and Chinese Presidents Donald Trump and Xi Jinping won’t take place before April at the earliest. Even so, both the Aussie and the Kiwi strengthened slightly.