Kantox currency update: sterling dives on fears of a no-deal Brexit
The pound sterling is being the worst performer in an otherwise quiet trading week and is depreciating sharply to reach mid-term lows against its main rivals, weighed by investors’ concerns about the increasing chances that the Brexit negotiation finishes without an agreement.
The market has reacted to the comments of the Governor of the Bank of England, Mark Carney and UK trade minister Liam Fox who have warned recently about the high likelihood of a disorderly Brexit. According to a Reuters poll, however, the economists remain more optimistic, giving a 75% chance that the EU and the UK will finally reach a free-trade deal.
EUR/USD upside limited at 1.1625. Euro rebound from support area at 1.1510/20 extended on Wednesday above 1.1600, although the pair found resistance at 1.620/30 area before retreating below 1.1600. As at London market opening times, the EUR/USD is trading at 1.1595.
GBP/USD: dives to fresh 11-month lows sub 1.2900. The sterling is going through a free-fall, hammered by market concerns about the possibilities of an unfriendly Brexit. The pair has lost more than 2% over the last five days, to hit levels below 1.2900 for the first time since last summer. As at London market opening times, the GBP/USD is trading at 1.2865.
USD/JPY: dips to two-week lows at 110.70. The latest dollar reversal from 111.50 area extended on Wednesday to 110.790, as the market digested the latest US proposal to increase tariffs to Chinese imports, although the pair has managed to pick up on Thursday’s Asian session, returning to 111.00 area. As at London market opening times, the USD/JPY is trading at 110.95.
In the Calendar Today
Today, in the US we will have a string of moderate relevance events, only worth noting the U.S. initial jobless claims and Chicago Fed president Charles Evans’ speech, which might have a moderate impact on the US dollar.
Later today, the Japanese Cabinet Office will release the first estimation of the Q2 Japanese Gross Domestic Product. According to the market consensus, the Japanese economy might have returned to growth in the second quarter after the contraction observed in the first. This might have a positive impact on the yen.
12:30 GMT US: Initial Jobless claims (Jul 27 week)
Previous: 218K Expected: 220K
13:30 GMT Fed: Evans’ speech
23:50 GMT JPN: Gross Domestic Product Annualized (Q2)
Previous: -0.6% Expected: 1.4%