Sterling slumped against the dollar and the euro on Tuesday as doubts grew about whether British Prime Minister Theresa May can get a Brexit agreement through a divided parliament.
May began a tour of the United Kingdom to drum up support for her Brexit divorce deal with the European Union but her deputy said parliament might reject it if asked to vote on it now. May’s attempts to win over critics in her Conservative and opposition parties in order to get her deal approved are seen by investors as increasingly fraught.
Sterling’s losses were compounded by comments from U.S. President Donald Trump that a Brexit deal could hamper trade ties with the United States.
The U.S. dollar gained on Tuesday after Federal Reserve Vice Chair Richard Clarida backed further interest rate hikes but noted the importance of monitoring economic data as the U.S. central bank approached a neutral stance. In a carefully worded speech that comes on the heels of another volatile stock market drop, Clarida stressed how difficult it was for the U.S. central bank to determine both the neutral interest rate and the maximum level of unemployment.
It comes after Fed Chairman Jerome Powell last month said the Fed may raise interest rates above an estimated neutral setting as the “remarkably positive” U.S. economy continues to grow. A speech by Powell on Wednesday and minutes from the Fed’s Nov. 7-8 meeting on Thursday will be evaluated for further indications of how many more times the U.S. central bank is likely to hike interest rates.
Tentative – GBP: Bank stress test results
13.30 – USD: Preliminary GDP QoQ; Forecast at 3.6% against previous of 3.5%
17.00 – USD: Fed Chair Powell Speaks