Forex - Pound Down on Fresh Uncertainty; Euro Steady After Ifo

  • Forex News
Forex - Pound Down on Fresh Uncertainty; Euro Steady After Ifo
Credit: © Reuters. -- The British pound was stuck at the lower end of its recent ranges in early trading Friday amid fresh confusion over the course of Brexit, after opposition leader Jeremy Corbyn refused to accept Prime Minister Boris Johnson's call for a general election in December.

By 4:10 AM ET (0810 GMT), sterling was flat against the dollar at $1.2857, and down 0.2% against the euro at 1.1560. It's now on course for a drop of nearly 1% against the single currency this week as the initial rush of euphoria at the conclusion of the divorce deal between the EU and U.K. ran into the familiar problems of winning approval in the U.K. parliament.

"It now looks likely that the U.K. Prime Minister Johnson has lost a parliamentary vote before it has even been held," said Paul Donovan, chief economist at UBS Wealth Management, said in a morning briefing. "Markets are right to remain indifferent to this political noise."

EUR/USD is finishing the weak on a low note, after outgoing European Central Bank President Mario Draghi repeated at his last press conference that the outlook for the economy is poor and that the risks remain skewed to the downside. The closely-watched Ifo business climate index gave a hint that the German economy is bottoming out after a rough year, the index staying unchanged at 94.6, slightly better than the 94.5 expected.

Draghi is making way for International Monetary Fund President Christine Lagarde, who has said she would like a strategic review of how the ECB conducts its monetary policy, against a backdrop of concerns that inflation is too low and that the effectiveness of tools such as interest rates and asset purchases (also known as quantitative easing) has weakened as the bank cut its benchmark rate well below zero.

"The bar for more ECB easing is higher," analysts at Nordea markets wrote in a research note. "The opposition against the Asset Purchase Program was loud and clear after the September meeting and should make the Governing Council under President Lagarde think twice before doing more of that. At the same time, cutting interest rates deeper into negative may not be that effective despite tiering.

Attention is now likely to switch to the Federal Reserve's policy meeting next week, where expectations - according to's Fed Rate Monitor Tool - are for another 25 basis-point cut in the Fed Funds rate. Indonesia and Turkey both cut interest rates on Thursday, keeping the global trend of monetary easing intact. The Turkish lira weakened in morning trading Friday to 5.7732 to the dollar, but has surprised some with its resilience, given that the central bank cut its key rate by a whopping 250 basis points.

Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

Error: File type not supported

Drop an image here or


Related Articles