The Pound managed to move away from 20-month lows on Tuesday, as hopes increased that Prime Minister Theresa May can avoid a no-deal Brexit. This followed on from pledges made on Monday that May would seek assurances from the European Union before mid-January to try and break a deadlock over Britain’s efforts to leave the bloc.
Whether any assurances will be enough for her to gain parliamentary approval for her much-criticized deal remains to be seen. She faces an uphill battle to convince lawmakers to back her, especially after she postponed the previous vote after it was widely accepted that she would suffer an embarrassing defeat. Investors are also hopeful that there will be a delay to Brexit should May’s deal prove an impossible sell to parliament.
This optimism came despite the government supposedly stepping up its plans for a no-deal Brexit, underlining the risk of a continued deadlock. It is still fair to say that traders are reluctant to bid up the pound too much given the threat of a no-deal Brexit.
The dollar fell on Tuesday ahead of Wednesday Evening’s Federal Reserve meeting. Investors began to unwind long bets on the currency, anticipating that the Federal Reserve could slow the pace of U.S. interest rate hikes next year.
This comes after recent mixed U.S. and global economic data, and persistent market volatility has led to the view that the Fed’s widely expected rate hike on Wednesday could mark the end of three years of steady rate increases.
09:30 – GBP: CPI expected to decrease to 2.3%
19:00- USD: FED Interest Rate Decision forecast to increase to 2.5%
19:00 - USD: Economic Projections
19:00 - USD: FOMC Statement
19:30- USD: FOMC Press Conference