Pound Falls On Brexit Concerns
21 May 2019 - 5:15PM
RTTF2
The pound declined against its major counterparts in the
European session on Tuesday, as U.K. cabinet meeting kicked-off
amid deep divisions over whether the government should opt for
no-deal Brexit, if Prime Minister Theresa May couldn't pass her
Withdrawal Agreement Bill through Parliament next month.
While Commons leader Andrea Leadsom suggested the UK must be
"prepared to walk away," Philip Hammond is set to warn that "all
the preparation in the world will not avoid the consequences of no
deal."
The withdrawal deal, which will be put to a vote in Parliament
in the week of June 3, faces tough challenges following the failure
of cross-party talks last week.
Uncertainty over the approval of Brexit Withdrawal Agreement by
the Parliament as well as the chance of a hardline Brexiteer
replacing PM May has been weighing on the pound since last
week.
Meanwhile, European markets advanced after the U.S. government
temporarily eased some trade restrictions imposed on Chinese
telecomunicatioms equipment company Huawei Technologies.
The U.S. Commerce Department will now allow the Chinese
technology major to purchase US goods in order to maintain existing
networks and provide software updates to existing Huawei
handsets.
However, Huawei will not be allowed to buy American parts and
components to manufacture new products without license
approvals.
The Industrial Trends survey from the Confederation of British
Industry showed that UK manufacturing orders hit its lowest level
since October 2016.
The order book balance dropped to -10 percent from -5 percent in
April. At the same time, the export order books balance slid to -16
percent, the lowest since July 2016.
The currency traded mixed against its major counterparts in the
Asian session. While it held steady against the greenback and the
euro, it rose against the yen and the franc.
The pound slipped to more than a 3-month low of 0.8789 against
the euro, from a high of 0.8764 hit at 2:00 am ET. The pound is
likely to test support around the 0.89 region.
The pound weakened to 1.2685 against the greenback, its lowest
since January 15. This follows a high of 1.2732 touched at 7:30 am
ET. If the pound drops further, 1.25 is possibly seen as its next
support level.
After rising to 1.2862 against the franc at 2:00 am ET, the
pound reversed direction, touching a 4-month low of 1.2812. The
pound is seen finding support around the 1.27 region.
The pound that ended Monday's trading at 140.01 against the yen
declined to a 4-day low of 139.65. Next key support for the pound
is seen around the 137.00 level.
Looking ahead, Eurozone flash consumer sentiment index for May
is due at 10:00 am ET.
At the same time, U.S. existing home sales for April are
scheduled for release.
Chicago Fed President Charles Evans will speak about the economy
and monetary policy at the Financial Markets Conference in Florida
at 10:45 am ET.
At 12:00 pm ET, Boston Fed President Eric Rosengren will give a
speech at the Economic Club of New York.
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