06/02/2019 - Sterling Falls To Two-Week Lows

GBP

Sterling fell to two-week lows on Tuesday after weak survey data and uncertainty about the progress of Brexit negotiations pushed the currency below a key market level forcing big investors to cut some of their bets on the pound.

While a weak Purchasing Managers’ Index (PMI) report was the initial catalyst for the pound’s fall, its losses accelerated after it broke convincingly below the 200-day moving average against the resurgent dollar.

At a time when uncertainty over the outlook for Brexit negotiations has sapped broader demand for the pound with less than two months to go before Brexit, the pound fell more than half a percent against some of its major peers.

Prime Minister Theresa May has just met lawmakers to try and overcome a parliamentary impasse that has raised fears among investors about a disorderly ‘no-deal’ Brexit. Concern is mounting about the risk of a no-deal exit and that is showing up in derivative markets which are predicting more currency volatility in the coming days. Sterling has been supported in recent weeks by a belief that a last-minute parliament deal will avert the catastrophe of a no-deal Brexit and German Chancellor Angela Merkel said there was still time to find a solution to the impasse.

USD

Services expansion in the US cooled by more than forecast in January as a gauge of new orders dropped sharply in January to a one-year low, though a gain in employment signalled support for demand.

The Institute for Supply Management’s non-manufacturing index showed service industries began 2019 on a softer note. While the gauge held above the 50 line between expansion and contraction and eleven of 18 industries reported growth, a key measure of business activity fell to a six-month low.

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