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FX round-up: Sterling's overall reaction to 'Brexit Wednesday' tame, euro down

By Andrew Schonberg

Date: Wednesday 29 Mar 2017

FX round-up: Sterling's overall reaction to 'Brexit Wednesday' tame, euro down

(ShareCast News) - Sterling saw a rather "tame" reaction to Brexit negotiations being activated by Prime Minister Theresa May, rising from a midday funk to recoup most of its earlier softness against the US dollar.
At 17:05 GMT, sterling was down 0.31% to $1.2411, and up 0.21% to €1.1538. It was down on the aussie, loonie, kiwi and yen, but a little higher on the rand.

"Today was surprisingly cordial, with the conciliatory tone struck in Theresa May's letter being matched by (EU council president Donald) Tusk's decision to proclaim 'we already miss you'," said IG market analyst Joshua Mahony.

"The lack of any real fire and divisiveness on either side will have no doubt been responsible for what was a fairly orderly day for the pound, all things considered," he said.

Connor Campbell, financial analyst at Spreadex, said that, in the "grand scheme" of Brexit trading days, the "reaction to the triggering of Article 50 was rather tame."

"Cable now finds itself ... roughly where it was before Donald Tusk received the PM's handwritten letter, but only after some apt indecisiveness during Theresa May's address to the House of Commons," said Campbell.

"Sterling fared better against the euro, which ended up being the main loser from this afternoon's events, with the pound taking 0.4% off its soon to be distant cousin."

Michael Hewson, chief market analyst at CMC Markets UK, was another who opined that despite widespread predictions of doom and gloom the pound has held up rather well.

"While the pound has come under pressure against the US dollar, as well as the Australian dollar, it is holding up well against the euro despite an earlier slide, as the latest economic data showed a minor slowdown in UK consumer borrowing habits."

Looking further ahead, with the well telegraphed beginning of Brexit out of the way, global markets would be scrutinising any updates from Brexit talks -- official or unofficial -- to divine what the post-divorce wonderland might look like.

Mahoney said: "The forthcoming years will no doubt prove volatile and unpredictable, yet ultimately the end result is what matters most."

While the US dollar rose against sterling, euro and rand, it was lower on the aussie, loonie, kiwi and yen.

"The US dollar has continued to rise (on sterling) after comments from Charles Evans of the Chicago Fed that he favoured one to two rates rises this year, with the euro in particular coming under pressure," said Hewson.

FXTM research analyst Lukman Otunuga added that fact investors remained cautiously optimistic over (US President) Donald Trump's pro-growth economic policies -- despite the recent setbacks -- could offer some support to the greenback.

"While the improving sentiment towards the US economy may translate to further upside on the dollar in the longer term, the lingering uncertainty over Donald Trump could still be enough to limit gains in the short term," said Otunuga.

"From a technical standpoint, the dollar index is still pressured on the daily charts but a break and daily close above 100.00 could be the first steps for bulls to reclaim back some control."

Weighing on the euro, which hit an eight-day low, was a report from Reuters that rate-setters at the European Central Bank were wary of making any further changes to their policy message may also have played a hand.

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