FX round-up: Political uncertainty takes its toll on Sterling, UK data back in focus
By Alexander Bueso
Date: Wednesday 08 May 2019
(Sharecast News) - Sterling gave back ground on Wednesday amid a significant amount of 'market chatter', ahead of the 23 May elections to the European Parliament, regarding pressure on the Prime Minister to quit.
One report published early in the session even indicated that the Chairman of the Tories 1922 Committee had set a deadline of 1600 BST for Theresa May to spell out how she would go about stepping down or risk a bid in the following weeks to oust her.
There was also talk that negotiations between the government and Labour had reached an impasse.
"Optimism over cross-party Brexit talks fading amid substantial criticism over the customs union plans that appear to form the backbone of any agreement between May and Corbyn," said IG's Chris Beauchamp.
"Ultimately such an agreement would limit the UK's ability to form unilateral trade deals and will face a substantial pushback should such a deal reach parliament."
On the back of that news, in late trading Sterling was down by 0.55% versus the euro at 1.1620 while cable had shed 0.54% to change hands at 1.30056.
David Madden at CMC Markets UK was of a similar opinion, saying: "Sterling has come under pressure again as the uncertainty surrounding Brexit, and the lack of clarity in regards to the situation has chipped away at investors' confidence in the pound.
"It was confirmed that the talks between the Conservative Party and the Labour Party will continue today, but traders aren't holding out much hope."
On a different note, following the previous week's 'hawkish' MPC meeting and following the extension to the Brexit deadline, Samuel Tombs, chief UK economist at Pantheon Macroeconomics said a 2019 hike in Bank Rate was now back "in play".
Hence his expectation that financial markets would refocus their attention on UK economic data over the next few months.
Markets were pricing in 25% odds of a rate hike in 2019, versus almost zero just one month ago, Tombs said.
Dollar/yen, the funding currency for carry trades was steady, drifting lower by only 0.13% to 110.11, as was euro/dollar, which was up by 0.03% to 1.11944.
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