Mounting Uncertainty Weakens Pound

GBP

Sterling is near its weakest against the U.S. dollar in more than three years, amid mounting uncertainty as British lawmakers prepared to vote on the first stage of a plan to block Prime Minister Boris Johnson from pursuing a no-deal Brexit.

Johnson’s opponents plan to put forward a vote that would enable them to seize control of the parliamentary agenda on Wednesday to try to pass legislation that would force Johnson to seek a three-month delay to Britain’s EU exit. Rebel Conservative MPs are expected to try to legislate to force Prime Minister Boris Johnson to look for a Brexit extension in mid-October, if he is unable to strike a deal with Europe. Johnson has, in turn, threatened a snap election if their bid succeeds. Johnson has made it clear that if the government was defeated, it would hold a vote on Wednesday to approve an early election, most likely to be held on Oct. 14.

EUR

The euro fell to its weakest in more than two years against the dollar after a survey on Monday showed European manufacturing contracted for seven straight months, reinforcing expectations that the European Central Bank will ease monetary policy. The ECB’s Governing Council holds its next monetary policy meeting on Sept. 12 and has all but promised a stimulus package, with economic growth faltering amid a global trade war and Germany’s manufacturing sector already in recession. Market expectations are that it will carry out several interest rate cuts in the coming year, along with a fresh round of bond purchases, commonly known as quantitative easing.

Key Announcements

15:00 – USD: ISM Manufacuring PMI expected to remain at 51.2