Dollar pinned near one-month lows on weak data; pound volatile

Daniel Fowler
October 19, 2019

Movement in the Euro was also driven largely by Brexit sentiment, with the shared currency fluctuating throughout the session.

EUR/USD: The euro rose against the USA dollar on Friday as the common currency jumped on hopes that a Brexit deal between Britain and the European Union could improve the odds of the euro zone avoiding a recession for now.

China's yuan weakened slightly to 7.0990 per dollar, while the safe-haven Swiss franc rose 0.1% to 0.9936 per dollar. Sterling has risen 1.92% against the greenback this week, leading it to a 1.1% 2019 gain, while the Pound-to-Yen rate has gone from a -2% loss to being up 2.26%.

"We don't see no-deal risks coming back to the market", he added.

Doubts about whether the deal will be approved in the British parliament were still sky high, though, with swathes of lawmakers, who are either reluctant about Brexit or anxious the deal is not a clean enough break, due to debate the deal in a rare Saturday sitting.

Trading in sterling options suggested high volatility in the currency was likely one way or another.

And the Turkish lira jumped more than one percent after Ankara said it would halt military operations in northern Syria and US Vice President Mike Pence said Washington would not impose any fresh sanctions.

It can be calculated at any point in time by dividing the GBP/USD rate over the EUR/USD rate, with the implication being that movements in both are always amalgamated into the GBP/EUR rate. A pound was worth 1.2759 dollars and 1.1525 euros.

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In less than a week, sterling had managed to gain more than 6% in value against the dollar as hopes of a Brexit deal by the end of October 31 have risen. And the Euro does benefit from an ebbing of "no deal" Brexit risk, albeit to a lesser extent.

He mentioned if the deal was accepted by MPs the pound would climb considerably larger than $1.30, but when politicians block the settlement it might slide to $1.25 as uncertainty over an extension or election returns, whereas a no-deal situation would ship it to $1.20 or decrease.

So, there is a possibility that the pound crosses could gap lower at the open on Sunday night in the event that parliament rejects the deal on Saturday. "May's deal along with the three former Labour independents, will have a change of heart", wrote Samuel Tombs, the chief United Kingdom economist at Pantheon Macroeconomics, in a note sent to clients on Thursday.

The pound was trading at 86.23p to the euro, up from 86.3p at Tuesday's close.

In rollercoaster deals, the pound had rallied Thursday to nearly $1.30 on news that negotiators had hammered out an agreement that would avoid Britain leaving the European Union without a divorce deal - a move many commentators warn could be economically catastrophic. That would be its highest level since May 2017.

Euro investors will be looking ahead to next Monday's release of Germany's producer price index for September, which is expected to ease by -0.1%.

On the small chance that the deal actually passes this weekend, the Pound would rocket.

Swathes of lawmakers, who are either reluctant about Brexit or anxious the deal is not a clean enough break, will debate the deal in a rare Saturday sitting, meaning Monday trading will certainly be lively.

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