11/10/16 - Hard Brexit Talk Still Weighing on Pound

GBP

Sterling continued its fall on Monday, extending last week's heavy losses as investors bet that Britain will undergo a "hard Brexit" - a total split from Europe's single market. Trading in the pound was markedly calmer than on Friday, when a "flash crash" wiped out a tenth of its value in a matter of minutes in early Asian trade. However sentiment towards sterling remained gloomy, with speculators' bets against it having reached record highs in the week to last Tuesday.

Losses accelerated last week on Brexit worries, after Prime Minister Theresa May set a March start date for formal divorce proceedings and expressed concern about loose monetary policy, which some saw as a thinly veiled attack on the Bank of England. Market players think May's government is leaning towards a "hard Brexit" - a scenario in which Britain gives up full access to the EU's single market in order to impose maximum control on its borders. Some fear that could hinder trade and constrict the foreign investment needed to fund Britain's huge current account deficit, one of the biggest in the developed world.

 

USD

The dollar firmed across the board as it continued to benefit from expectations the Federal Reserve would most likely raise interest rates in December. Investors are looking to Wednesday's release of minutes of the latest Federal Reserve Open Market Committee meeting to find out how close the U.S. central bank was to hiking rates last month.

Key Announcements

10.00 – EUR: German ZEW Economic Sentiment forecast to increase to  4.2 from 0.5