FX Rate News

Sterling rose on Wednesday after U.K. lawmakers rejected the idea of leaving the European Union without a Brexit deal in place.

The pound was up 1.42 percent against the dollar at $1.3257.

Britain’s parliament voted at 3:00 p.m. EST against the risk of a “no-deal” Brexit, 24 hours after a second defeat for Prime Minister Theresa May’s divorce treaty left Britain heading into the unknown.

Investors expected that British lawmakers would resoundingly vote against leaving the European Union in 16 days’ time without a transition agreement.

The vote Wednesday set up a vote for Thursday on delaying Britain’s EU departure, a move that could bolster the pound because investors say it would increase May’s chances of securing a deal or even lead to Brexit being called off altogether if a second referendum is held.

The pound has swung wildly in the last 48 hours between $1.30 and $1.33 and the currency has at junctures been at its most volatile since the June 2016 Brexit referendum.

Earlier, sterling’s gains were spurred earlier by a BBC media report that Attorney General Geoffrey Cox had further legal advice which might help May win over lawmakers to her Brexit deal.

Sterling rallied on Tuesday on speculation that British Prime Minister Theresa May might be closer to securing approval for her Brexit deal after the European Commission agreed to some changes to it ahead of a vote in the British parliament.

The pound jumped as high as $1.3290 as May won legally binding Brexit assurances from the European Union, in a last ditch attempt to sway rebellious British lawmakers who have threatened to vote down her divorce deal.

“The market was sensitive to positive news rather than negative news as it had already priced in very bad scenarios,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.

Yamamoto said the likelihood remained low that British lawmakers would now agree to May’s deal in a vote expected later on Tuesday, just over two weeks before Britain’s scheduled March 29 departure from the European Union.

After paring some of its earlier gains, sterling was last trading half a percent higher on the day at $1.3214. It was still up 2.1 percent from a low of $1.2945 at one stage on Monday.

The euro slipped to its lowest on the pound since May 2017 at 84.71 pence, before recovering the losses somewhat. It was last quoted down one-third of a percent at 85.19 pence.

Most other currencies stayed within familiar trading ranges before U.S.February inflation figures due at 1230 GMT.

Market sentiment received a modest boost after data on Monday showed U.S. retail sales rose moderately in January, lifted by an increase in purchases of building materials and discretionary spending.

The dollar index, which measures the greenback against a basket of six rivals, was down 0.2 percent at 97.056 as some investors bought riskier assets.

However, the dollar tacked on 0.2 percent against the Japanese yen to 111.41 yen on the back of the improved appetite for risk.

If May loses the vote on her Brexit deal on Tuesday, she has said lawmakers will get a vote on Wednesday on whether to leave the EU without a deal and, if they reject that, then a vote on whether to ask for a limited delay to Brexit.

At a joint news conference with E.U. Commission head Jean-Claude Juncker late on Monday, May announced three documents aimed at addressing the most contentious part of the exit deal she agreed in November — the Irishbackstop.

“Seeing them together in the same screen is a positive – that there is some hand holding there and working together to move forward,” said Bart Wakabayashi, Tokyo branch manager at State Street Bank.

The Irish backstop is an insurance policy aimed at avoiding controls on the sensitive border between the British province of Northern Ireland and EU member Ireland.

“If they can break (the backstop) down to a level where there can be some negotiation or at least compromise on both sides, there definitely does seem (to be) light at the end of the tunnel,” added Wakabayashi.

The euro, which has struggled recently in line with a sputtering euro zone economy, found a measure of support on the improved sentiment and the Brexit news.

The single currency was last up 0.1 percent at $1.1259, extending recent gains to a third session.

The dollar edged up on Monday, hovering close to a near three-month high as investors continued to favor the greenback amid global growth concerns, while sterling kept declining on uncertainty over Britain’s exit from the European Union.

The dollar index, which measures the greenback against a basket of six key rivals, gained 0.1 percent to 97.412.

The index was 0.3 percent shy of its recent peak of 97.710 hit last Thursday, its highest since Dec. 14. It is up 1.3 percent this year.

The euro was basically flat at $1.1232. The single currency had fallen to its weakest level since June 2017 on Thursday, hurt by dovish signals from the European Central Bank (ECB).

“After the ECB’s big downgrade of the growth outlook for the euro area, together with the weaker-than-expected Chinese export and import data, the worry over the global economy is re-surging again,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

“That’s pushing down the euro and other currencies,” he said. “The U.S. is not particularly strong, but other areas are weak. That’s why the dollar is relatively strong. ”

Data on Friday showed U.S. employment growth almost stalled in February, with the world’s top economy creating a measly 20,000 jobs, far fewer than expected by analysts.

But traders found some hope in figures showing the U.S. employment rate slipped back below 4 percent and average hourly earnings accelerated by 0.4 percent, helping to reduce the dollar’s losses during the previous session.

On Monday, most currencies stayed within well-trodden trading ranges before U.S. retail sales figures for January due at 1230 GMT and U.S. February inflation figures expected on Tuesday.

The big exception was the pound, which gave up one-third of a percent to $1.2973 after briefly dipping to a near three-week low on nervousness over Brexit. The currency had already fallen for seven straight sessions.

Sterling came under renewed pressure after British foreign minister Jeremy Hunt said on Sunday Brexit could be reversed if lawmakers reject the government’s exit deal.

His remarks followed a warning from two major eurosceptic factions in parliament that Prime Minister Theresa May was likely to face heavy defeat in a parliamentary vote on Tuesday on whether to approve her EU exit plan.

The British leader is scrambling — so far unsuccessfully — to secure last-minute changes to an EU exit treaty ahead of the vote, which comes less than three weeks before the United Kingdom is set to leave the European Union on March 29.

“Speculators seem to be taking sell positions in the pound after it was bought for a short time as participants are awaiting the Brexit outcome,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

Mizuho’s Yamamoto said traders are trimming holdings of sterling on reduced expectations of a rate hike by the Bank of England, making the currency increasingly sensitive to near-term events, such as the parliamentary vote.

“These days, the UK inflation data isn’t as strong as before,” he said. “The rate-hike expectation after the avoidance of the no-deal Brexit is fading away.”

Against the Japanese yen, the dollar was a shade lower at 111.125 yen

Major currencies mostly stuck to tight ranges on Thursday as traders focused their attention on the European Central Bank’s (ECB) policy review later in the day, while the Australian and Canadian dollars struggled near two-month lows.

The yen and the Swiss franc edged up as investors sought shelter in the safe-haven assets amid signs of tension between the United States and North Korea and renewed fears of a slowdown in global growth.

The ECB is expected to cut growth forecasts and is likely to provide its strongest signal yet that stimulus is coming in the form of more cheap long-term bank loans to fight an economic slowdown.

The euro trod water on Thursday at $1.1307, about 1.0 percent below a one-month high hit on Thursday last week.

“The market has already been pricing in that the economic growth in the euro zone isn’t good,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities in Tokyo.

“Though I think there is a likelihood there may be a chance to their (ECB’s) forward guidance, that also has been already priced to some extent,” he said.

The OECD on Wednesday cut forecasts again for the global economy in 2019 and 2020, following on from previous downgrades in November, as it warned that trade disputes and uncertainty over Britain’s exit from the European Union would hit world commerce and businesses.

The Australian and Canadian dollar hit their two-month lows as investors cut back holdings on expectations policymakers would leave interest rates alone for the time being or even lower them to counter weakness in those economies.

The Aussie hit a fresh two-month low of $0.70205 after data showed retail sales rose 0.1 percent in January, missing expectations for a 0.3 percent increase.

The currency was already nursing losses from the previous day when below-par fourth-quarter economic growth figures reinforced evidence of slowing domestic momentum and backing expectations for a rate cut this year.

The Australian dollar was last at $0.7044.

The Bank of Canada (BoC) on Wednesday said there was “increased uncertainty” about the timing of future rate hikes as it held interest rates steady at 1.75 percent as expected.

The loonie fell as low as C$1.3457 after the release of the BoC’s latest policy statement, its lowest against the greenback since Jan. 4. On Thursday, it was a tad stronger on the day, last trading at C$1.3436.

The yen and the Swiss franc, both perceived as safe-haven currencies, found support amid signs of tension between the United States and North Korea.

New activities have been detected at a North Korean intercontinental ballistic missiles plant, South Korean media said on Thursday, as U.S. President Donald Trump said he would be very disappointed if Pyongyang rebuilt a rocket site.

“It’s news that leads to buying of the yen and, in that regard, also affects the Swiss franc,” said Kazushige Kaida, head of foreign exchange at State Street Bank in Tokyo.

“But there was a move of only 5 bips or 10 bips, so it’s hard to say there was a big response to this,” he said.

The yen rose one tenth of a percent to 111.65 yen per dollar, while the Swiss franc was also up 0.1 percent, at 1.0043 francs per dollar.

The dollar index, which measures the greenback against a basket of six key rivals, was steady at 96.852.

Traders have remained bullish on the dollar in view of the continuing uncertainties over Brexit and whether U.S.-China negotiations will produce a substantive trade deal.

The dollar index has gained 1.1 percent over the last six trading sessions after hitting its lowest level since early February on Thursday last week.

The dollar stood close to a two-week high against key peers on Tuesday, shored up by a resilient U.S. economy and a flagging euro ahead of a European Central Bank policy meeting.

Higher U.S. bond yields kept the dollar well bid, and though rates were off overnight peaks, traders bet the greenback had more going for it than some of its peers.

The euro remained wobbly before the ECB meeting on Thursday. The ECB is facing growing pressure to address how to protect the euro zone economy from a protracted slowdown.

In contrast, the dollar has enjoyed some support from higher U.S. Treasury yields as recent data, including U.S. fourth quarter gross domestic product, has eased fears of a potentially rapid loss in economic momentum.

The dollar index versus a group of six major currencies was 0.05 percent higher at 96.726 after going as high as 96.816 the previous day, its strongest since Feb. 19.

Although benchmark U.S. Treasury yields pulled back from peaks seen in late January, underlying demand for the dollar remained solid in a sign of confidence over the economic outlook.

The euro dipped 0.1 percent to $1.1326. It had brushed an 11-day low of $1.1309 on Monday.

“The ECB meeting is unlikely to provide big surprises, but the euro is getting top heavy as the central bank, after all, is expected to strike a dovish tone,” said Shin Kadota, senior strategist at Barclays.

The dollar rose 0.15 percent to 111.92 yen, bouncing back from losses suffered the previous day.

Against a broadly firmer greenback, the Australian dollar was down 0.2 percent at $0.7077, cancelling out modest gains made overnight on expectations for further easing of trade tensions between the United States and China.

The Australian dollar sagged after Tuesday’s Caixin/Markit China purchasing managers’ index (PMI) showed the services sector in the world’s second largest economy easing to a four-month low. The currency is sensitive to developments in China, Australia’s main trading partner.

The Aussie briefly ticked up after the Reserve Bank of Australia left interest rates unchanged at 1.5 percent as widely expected on Tuesday.

“The currency got some lift as the RBA refrained from taking an even more dovish stance. The focal point, however, is still on potential easing by the RBA and the Australian dollar remains on the defensive,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

The Australian dollar took a big hit last month after the RBA stepped back from its long-standing tightening bias, saying the next move in rates could just as well be down as up.

The Australian dollar and the Chinese yuan inched up on hopes Washington and Beijing were close to a trade deal after a bitter year-long tariff dispute.

Fueling such expectations was a report from the Wall Street Journal on Sunday that said the United States and China could reach a formal agreement at a summit around March 27 given progress in talks between the two countries.

The Aussie gained as much as 0.57 percent to $0.7118, before giving up some of its gains to $0.7085 following soft business inventories and declines in job advertisements and dwelling approvals.

“The data was seen as pointing to a weak reading in Australian GDP data due on Wednesday, prompted speculators to create new short positions,” said Yukio Ishizuki, senior strategist at Daiwa Securities.

But Ishizuki also said markets had gone too far in pricing in a downturn in the Australian economy.

“Interest rate futures are now pricing in a rate cut this year but the economy could turn out to be stronger than expected given recent strength in commodity prices. I’d bet the Aussie could easily rise to around $0.73-74,” he said.

The Reserve Bank of Australia will hold its policy meeting on Tuesday.

The Chinese yuan ticked up 0.20 percent to 6.7030 to the dollar in offshore trade, edging near its 7-1/2-month high of 6.6737 hit last week.

The yuan has been supported since late last month after Washington delayed its self-imposed March 1 deadline for raising tariffs on $200 billion worth of Chinese imports, citing progress in its trade talks with Beijing.

While the trade optimism pushed the dollar lower against most Asian currencies, it helped erase the greenback’s earlier losses against the safe-haven yen, which followed U.S. President Donald Trump’s criticism about Federal Reserve monetary policy and a strong dollar.

The dollar traded at 111.96 yen, near a 10-week high of 112.08 on Friday. It had dipped to 111.75 yen after Trump’s comments on the Fed.

“We have a gentleman that likes a very strong dollar at the Fed…I want a strong dollar, but I want a dollar that’s great for our country not a dollar that is so strong that it is prohibitive for us to be dealing with other nations,” he told his supporters in a speech.

The positive investor sentiment offset some of the caution that followed soft U.S. data published on Friday.

Factory activity, gauged by the Institute for Supply Management’s (ISM) survey, hit the lowest level since November 2016 while personal incomes fell for the first time in more than three years.

Expectations that the Fed will avoid raising interest rates any time soon have also underpinned risk sentiment.

“This week we have a few central bank meetings, including the European central Bank, Australia and Canada. All of them are likely to take either a dovish or neutral stance. That should support ‘risk-on’ trades,” said Shinichiro Kadota, senior FX & rates strategist at Barclays.

The euro stood little changed at $1.1365, with focus on Thursday’s ECB policy meeting.

Given recent weakness in the euro zone economy, the ECB looks certain to suggest a rate hike this year would be off the table and could signal a re-launch of its offer of long-term loans to banks.

Elsewhere, the British pound found support on receding fears that Britain will leave the European Union without a deal after Prime Minister Theresa May said last week lawmakers would get to vote on a delay to Brexit if they choose not to approve her withdrawal agreement.

The pound rose 0.2 percent to $1.3235, inching towards its near eight-month high of $1.3351 hit last week.

The Swiss franc rallied by half a percent against the dollar on Thursday as weak Chinese factory data and lack of progress at U.S.-China trade talks encouraged traders to take profits.

The British pound also saw profit-taking, but it is still on track to lead gains against the dollar in February as fears about a no-deal Brexit fade.

“The weak Chinese PMI data and concerns about the progress of U.S.-China trade talks are weighing on risk appetite, and that is pushing the franc higher,” said Esther Maria Reichelt, an FX strategist at Commerzbank.

Factory activity in China reached a three-year low in February as export orders fell at the fastest pace since the global financial crisis, more evidence of an economy facing weak demand at home and abroad.

Sentiment was also hurt by U.S. Trade Representative Robert Lighthizer’s comment that it was too early to predict an outcome in trade talks between Washington and Beijing.

The Swiss franc rallied half a percent against the dollar to 0.9967 and the Japanese yen gained a quarter of a percent to 110.75 yen.

Against a basket of its rivals, the dollar slipped 0.1 percent to 96.03. Traders said some of its weakness was caused by month-end selling after a strong month for risky assets.

Sterling edged lower after reaching a seven-month high on Wednesday as traders bet Britain’s departure from the European Union would be delayed.

“I think we had nothing significant from last night and we’re back into another hiatus until mid-March, so there is some bit of profit taking,” said John Marley, a senior currency consultant at SmartCurrencyBusiness.

The dollar languished near three-week lows on Wednesday as a reaffirmation of a patient stance by Federal Reserve Chairman Jerome Powell and a newly resurgent pound kept U.S. currency bears in firm control.

The dollar index against a basket of six major currencies stood at 96.113 after shedding 0.4 percent overnight, when it stooped to 95.948, its lowest since Feb. 5.

Powell said on Tuesday that rising risks and recent soft data were unlikely to prevent solid growth for the U.S. economy this year, but that the Fed would remain “patient” on further interest rate hikes.

“The dollar’s fall was a little puzzling as Powell’s comments did not offer fresh insight. But the market was in a state where the dollar was sensitive to potential bearish factors, and the strong pound also weighed,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities.

Sterling had rallied on Tuesday after British Prime Minister Theresa May offered lawmakers the chance to vote on delaying Brexit, opening up the possibility of avoiding a chaotic no-deal departure from the European Union.

The pound was little changed at $1.1348 after surging more than 1 percent overnight to a five-month peak of $1.3288.

The Australian dollar was a shade lower at $0.7182, taking a breather after three straight days of gains.

The Aussie was hurt at the start of February after the Reserve Bank of Australia opened the door for an interest rate cut. But the currency has rebounded nearly 2 percent from this month’s low of $0.7054 plumbed on Feb. 12.

“Differences in monetary policies are less of a driver for currencies after the Fed shifted to a more dovish stance, prompting other central banks to follow. Risk appetite is now a key incentive, and currencies like the Aussie benefit from ‘risk on,'” said Yamamoto at Mizuho Securities.

Global equities have performed strongly this week – MSCI’s world stock index advanced to a five-month peak – on factors including ebbing U.S.-China trade tensions.

Equity markets performance and monetary policy might come into focus again, especially if investors sell down stocks heavily, analysts say.

“Equities may not be a concern when they are rising but if that were to change, comments by Fed board members pertaining to any additional policy steps will gather attention once more,” said Makoto Noji, chief currency and foreign bond strategist at SMBC Nikko Securities.

The dollar was little changed at 110.58 yen after shedding 0.4 percent the previous day. The greenback rose to a two-month high of 111.24 on Monday but has met firm technical resistance near the 200-day moving average 111.30.