Euro, ster­ling spike against US dol­lar as Brexit plan gains cab­i­net ap­proval

Global Times US Edition - - BIZMARKETS -

The dol­lar weak­ened on Thurs­day against the pound and euro, which rose af­ter Bri­tain’s prime min­is­ter won cab­i­net ap­proval for her draft Brexit plan, but gains were capped by con­cerns over whether that plan will win par­lia­men­tary ap­proval.

Prime Min­is­ter Theresa May won the back­ing of her se­nior min­is­ters for a Euro­pean Union di­vorce deal on Wed­nes­day, push­ing the euro and ster­ling up 0.8 per­cent and 1.2 per­cent against the dol­lar, re­spec­tively, from their in­tra­day lows hit on Mon­day.

The draft di­vorce deal with the Euro­pean Union struck on Tues­day would al­low the United King­dom to leave the EU with a deal that avoids a chaotic “hard Brexit” de­par­ture. But EU chief ne­go­tia­tor Michel Barnier cau­tioned that the road to en­sur­ing a smooth UK exit was still long and po­ten­tially dif­fi­cult.

De­spite their out­per­for­mance over the dol­lar on Thurs­day, an­a­lysts still see firm sup­port for the safe haven green­back amid broader con­cerns about Brex- it and global trade ten­sions.

Ster­ling gained 0.06 per­cent ver­sus the dol­lar, chang­ing hands at $1.3002.

“Get­ting the draft ap­proved by the par­lia­ment will be ex­tremely chal­leng­ing and that’s why we are see­ing ster­ling gains capped at 1.3,” said Ray At­trill, head of cur­rency strat­egy at Na­tional Aus­tralia Bank.

He said the dol­lar’s fun­da­men­tals re­main strong, backed by a ro­bust US econ­omy and ris­ing wage pres­sures, which will keep the Fed­eral Re­serve on track for fur­ther rate rises.

How­ever, fur­ther gains will most likely be muted as traders are un­will­ing to place bullish bets af­ter Italy re-sub­mit­ted its draft 2019 bud­get to the Euro­pean Com­mis­sion.

It had the same growth and deficit as­sump­tions as a draft re­jected for break­ing Euro­pean Union rules, step­ping up its show­down with the EU over its fis­cal pol­icy.

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