Sterling was stable on Tuesday as investors kept their hands off the British currency, given that the risk of Britain crashing out of the European Union without a divorce deal on October 31st remained high.
The probability of a no-deal Brexit was still very much a concern for traders as Prime Minister, Boris Johnson, reiterated that he will take the country out of the bloc on deadline.
Even though the British Parliament approved a legislature which forces Johnson to request a deadline extension from Brussels if he cannot agree on a deal with the EU by mid-October, the Prime Minister said he would not do such a thing.
Johnson’s senior adviser, Dominic Cummings, said the United Kingdom will leave the EU on time.
Investors are weighing whether further monetary stimulus will be effective in countering economic weakness in the euro zone, and whether the ECB will disappoint dovish expectations baked into the market.
ECB policymakers are leaning towards a stimulus package that includes a rate cut, a beefed-up pledge to keep rates low for longer and compensation for banks over the side effects of negative rates, five sources familiar with the discussion said last week.
The Euro got a temporary boost on Monday, following a report that Germany is considering the creation of a “shadow budget” that would enable Berlin to boost public investment beyond the restrictions of constitutionally enshrined debt rules.
Germany can counter a possible economic crisis by injecting “many, many billions of euros” into the economy Finance Minister, Olaf Scholz, said on Tuesday, signalling his readiness for a big stimulus package if the economy tips into recession.
15.30 – USD: Crude Oil Inventories; forecast at -2.9M against previous of -4.8M.