FX round-up: Traders still wary of accidental 'no deal' Brexit, rupee drops
By Alexander Bueso
Date: Thursday 04 Apr 2019
(Sharecast News) - Sterling got whacked on Thursday after financial markets got wind of attempts by pro-Brexiters in the House of Lords to try and scupper the bill approved by MPs the day before requiring the Prime Minister to consult Parliament on the length of the extension to Article 50 that she would seek from Brussels.
Peers voted by 254 to 94 against an amendment tabled by Lord Forsyth that would have impeded the bill approved by MPs to pass on Thursday, but five more amendments were being voted on.
In an accident prone Wednesday that saw the printer in the House of Commons break down, and two Labour MPs not vote due to personal circumstances, including Shadow Chancellor JohnMcDonnell, lawmakers managed to clinch passage by the narrowest of margins - just one vote.
On the back of that news, as of 1739 BST the pound was off by 0.6% against the US dollar and by 0.43% versus the euro to 1.1665.
"The Brexit process is clearly not the only thing falling apart in Westminster, with parliament suspended after water started pouring into the chamber. However, the focus for markets is on talks between Theresa May and Jeremy Corbyn, and with the pound dropping sharply, it is clear that hopes of a softer Brexit are fading fast," IG's Josh Mahony told clients just before the close of equity markets in London.
However, according to Downing Street, a second day of talks between the government and Labour had been "detailed nd productive", with talks set to continue on Friday.
The US dollar spot index was 0.22% higher to 97.3050 after the latest weekly jobless claims figures in the States surprised to the downside.
According to the Department of Labor, initial unemployment claims for the week ending on 30 March fell by 10,000 to just 202,000 - their lowest level since March 1969.
Meanwhile, US President Donald Trump reportedly told an audience that talks with Beijing were "coming along well" and some reports were indicating that a date for a summit with his counterpart Xi Jinping could be announced as soon as later on Thursday.
Dollar/yen however was little changed, trading up by 0.02% to 11.5180, while euro/dollar was off by 0.13% to 1.12185.
Data released earlier by the Federal Office of Statistics had been extraordinarily weak, revealing a month-on-month drop of 4.2% in March (consensus: 0.3%), although some economists showed scant surprise.
Claus Vistesen at Pantheon Macroeconomics conceded that the pace of decline was "startling" but added "these data don't tell investors anything they didn't already know about the German economy."
Further afield, India's central bank on Thursday cut its key lending rate from 6.25% to 6.0%, as expected in markets, but some economists questioned the Reserve Bank's forecasts for inflation, saying they were too low, even as others suggested that the RBI was acting on political considerations on the eve of the next general elections.
Hence, while the US dollar gained 1.08% against the rupee to 69.1613 following the policy announcement, yields on longer-dated government debt were also moving higher.
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