The Sterling continues to trade soft against the U.S. Dollar after it was left hammered a day earlier. London Mayor Boris Johnson’s decision to favour Britain’s exit from the European Union left a deep cut on THE Pound, which tested its lows against the greenback on Monday.
Brexit fears deepens
The free fall in the Pound led the rating agencies to issue a warning on UK’s credit score if it decided to exit EU. The uncertainty around the Brexit debate continues to reflect on Sterling, which further slide 0.14% to 1.4131 against the USD.
Stock markets volatile
Meanwhile, the Japanese Yen gained ground against the dollar after a rally in oil, and the stocks cooled down, which induced demand for the safe-haven currency. It appears that there is a broader risk aversion after China set a softer mid-point of yuan. USD/JPY was down by 0.67% to 112.16 during the late Asian hours. Likewise, the dollar slipped against the Swiss Franc, which is often preferred during volatile times. USD/CHF dipped 0.39% to 0.9956 today.
Later in the day, market participants will await data on consumer confidence, and home sales in the U.S. A strong data will reaffirm the pace of interest rate hike policy by the Federal Reserve. The U.S. Dollar Index traded 0.03% up to 97.41.
On the other hand, the euro was also largely battered as the focus remained on the Pound. EUR/USD traded 0.15% down to 1.1013 during the day. The market in Europe stays tuned to the testimony to be presented by the Bank of England before lawmakers today. The investors will closely watch for the Central Bank’s tone about the recent weakness in Pound and inflation.
According to Morgan Stanley, the sharp fall in Pound can bolster inflation, which will pave the way for the monetary tightening policies. However, the research firm added that the Pound has not shed too much so far to change inflation expectations strongly.