Currency markets are signalling a bumpy ride for the UK pound as tighter lockdown measures are expected to offset Brexit deal optimism that propelled the currency above $1.37 yesterday.
On Tuesday risky currencies gained with the yuan strengthening to a sixteen month high after Chinese data pointed to an economic recovery and the Australian and New Zealand dollars climbing, while the U.S. dollar fell.
On Friday rupee rose by as much as 18 paise against the US dollar. The rupee opened higher at 71.76 against the greenback, and climbed to as high as 71.62 at one point by late morning deals. According to analysts, positive developments in the US-China trade talks, a firm trend in domestic equity markets and easing crude oil prices revived the sentiment in the forex market. At 9:39 am, the rupee traded at 71.70 against the greenback, as against its previous close of 71.80.
The ex-Foreign Minister Boris Johnson has conveyed his desire to bid for the British PM via Tories once Mrs May steps down. Traders now concentrate on the cross-party Brexit talks that are on their last-ditched efforts between the ruling Tory and the opposition Labour party.
On Monday the pound rose as investors weighed the risks of another Brexit-themed week, with many willing to bet money on another, perhaps long extension to proceedings. In stock trading, Frankfurt was under pressure from poor German data, but other European equity markets reversed an earlier negative trend, while Wall Street stumbled at the opening bell.
The dollar remains subdued as the Federal Reserve meeting approaches. Given the recent run of disappointing US data, the market is taking a view that the Fed is set to tread a patient path through 2019 and is likely to cut its economic forecasts at its March meeting. This has been a drag on Treasury yields and means that yield differentials are driving a mild dollar underperformance.
The rebound on the dollar has continued over the past few sessions. However, there is little to suggest that this move has any grounding, other than perhaps for now the dollar is the best of a bad bunch. Treasury yields have been treading water, whilst yield differentials are hardly shouting for continued dollar strength either.