Pound Falls To 6-month Low

GBP

The pound dived to a six-month low against the dollar on Monday as concerns grew that arch-Brexiteer Boris Johnson will replace Theresa May as Prime Minister as he remains far ahead of his rivals in the race to lead their ruling Conservative Party.

Johnson, the face of the official Brexit campaign in the 2016 referendum, has promised to lead the United Kingdom out of the EU with or without an agreement by Oct. 31.

Latest positioning data also indicated that markets were getting cautious about the pound, with speculative bets against the British currency rising to a four-week high. The second round of voting in the Tory leadership contest is set for Tuesday, with the result due to around 1700 GMT. Any candidate with 32 votes or fewer is eliminated. If all candidates have more than 32 votes, the one with the fewest is eliminated.

USD

The U.S. dollar was modestly lower on Monday on weak economic data but remained near the two-week high set earlier in the session as investors reconsidered how dovish the Federal Reserve is likely to be at this week’s policy meeting.

Broader currency markets were quiet, as traders hesitated to put on large positions before the Fed’s two-day meeting, a meeting of European Central Bank policymakers in Portugal and the Bank of England’s interest rate decision on Thursday.

The New York Federal Reserve said on Monday “its gauge of business growth in New York State posted a record fall this month to its weakest level in more than 2-1/2 years”, suggesting an abrupt contraction in regional activity. The weak data did not change the low expectations the Fed will cut rates at its meeting this week.

Key Announcements

09.00 – EUR: ECB President Draghi Speaks; Talking at the ECB Forum on Central Banking
15.00 – GBP: BOE Governor Mark Carney Speaks; Panel discussion at the ECB Forum on Central Banking