- US Dollar strengthens after Federal Reserve’s official comments
- Bank of England Financial Stability Report later today
By Charlie Horsley
Sterling slumped against the US Dollar and the Euro yesterday as doubts grew about whether British Prime Minister Theresa May can get a Brexit agreement through a divided parliament. UK Prime Minister May began a tour of the United Kingdom to drum up support for her Brexit divorce deal with the European Union
but her deputy said parliament might reject it if asked to vote on it now. Sterling’s losses were compounded by comments from US President Donald Trump that a Brexit deal could hamper trade ties with the United States.
In the markets today, the US Dollar has started to edge higher versus a basket of currencies after positive comments from policy makers yesterday. Federal Reserve member Richard Clarida stated that he was an advocate of higher interest rates and expected a move towards more neutral rates in time. He acknowledged that it was difficult to predict where the new neutral level would be and that he was concerned about lower inflation. Markets focused on the talks of more rate rises and the US Dollar rose across the board.
Attention then turned to the trade war tensions with China - President Trump said this week that it was “highly unlikely” he would accept China’s request to hold off a planned increase in tariffs. That drove investors to safe-haven currencies such as the US Dollar and the Yen.
For the Pound we remain in a holding pattern waiting until the second week of December for further direction. The markets look to be pricing in that the deal won’t go through, so it will be up to May to change the feel around the country ahead of the MP vote.