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FX round-up: Traders look past BoE, Fed and push pound lower

By Alexander Bueso

Date: Tuesday 18 Jun 2019

FX round-up: Traders look past BoE, Fed and push pound lower

(Sharecast News) - Sterling continued drifting lower at the start of the week, even as traders waited on the result of policy meetings at the Bank of England, US Federal Reserve and Bank of Japan scheduled for over the coming week.
Weighing on the pound, which was 0.39% lower against the Greenabck as of 1952 BST on Monday evening at 1.2544 and by 0.44% to 1.1183 against the single currency, were the rising odds that Boris Johnson would make it into Number 10.

"Johnson remains a huge favourite to become the next prime minister, and given his unpopularity in Brussels, coupled with his insistence that a no-deal Brexit remains on the table, there is good reason to believe we will see the pound continue to suffer if he gets into power," said IG's Josh Mahony.

"Firms have been open about their lack of preparation for a no-deal Brexit, yet should Boris Johnson become prime minister, we are sure to start seeing a sharp rise in stockpiling ahead of the October deadline."

The major currency pairs were otherwise little moved on Monday, with dollar/yen up by 0.02% to 108.57 and euro/dollar adding 0.09% to 1.12195.

Nevertheless, that calm might yet prove deceptive should global trade tensions ratchet higher still.

On that note, economists at Morgan Stanley were reportedly telling clients that should US-China trade relations worsen further, pushing the US into a recession, then the US central bank might slash its official short-term interest rates to near zero.

Across the Channel, in an interview with the Financial Times, European Central Bank governing council member, Benoit Coeure reportedly said the euro area was not doing too badly, if one looked at strength in construction and services, signals from financial markets on the other hand, particularly from bond prices, were "quite alarming".

What little fresh data was available in Euroland was positive, according to economists, with Eurostat reporting that hourly labour costs accelerated to a year-on-year clip of 2.4% over the first three months of 2019, versus 2.3% in the last quarter of 2018.

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