Brexit was the name of the game in Tuesday currency trading, with reports of possible delays to the fast-approaching deadline and a second referendum driving the British pound to its highest level since September at its peak.
“There is one story in Europe today and that is Brexit,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.
The British pound GBPUSD, +1.2980% was the best-performing G-10 currency on Tuesday, initially boosted by reports that Prime Minister Theresa May will rule out a no-deal Brexit in response to the threat of revolt by 15 ministers. May’s cabinet is expected to discuss the extension of the March 29 Brexit deadline on Tuesday, with the premier expected to announce the conclusion in front of Parliament around 12.30 p.m. Eastern (7.30 p.m. London).
Meanwhile, local reports indicate that May will commit on Tuesday to having a vote on her Brexit deal on March 12. If that vote is rejected, then a vote on whether Parliament would support a no-deal Brexit on March 13 would follow, and if that is voted down, lawmakers would weigh in on extending article 50 on March 14.
Naeem Aslam, chief market analyst at ThinkMarkets, said May’s recent speeches in parliament have amplified uncertainty around her Brexit strategy. “She is changing direction like a revolving door. She has pushed the fate of the country on the cliff edge,” he said in emailed comments.
Brexit Brief: U.K. politicians given option to delay EU split
On Monday, sterling strengthened after the U.K.’s Labour Party announced it would support or bring forth a proposal for a second Brexit referendum.
Don’t miss: As Brexit clock runs, the pound is only priced for a ‘soft’ split
Sterling last fetched $1.3192, roughly a one-month high and up from $1.3097 late Monday in New York. At Tuesday’s peak of $1.3238, the pound was at its best level since late September, according to Dow Jones Market Data.
“We are looking at potential toward $1.34-$.135 on a confirmation of a delay in Brexit,” Chandler said.
Meanwhile, the euro EURGBP, -1.1875% fetched £0.8608, down 0.6%. Earlier, the pair slipped to a low of £0.8588, at a level not seen since May 2017. Against the U.S. dollar, the euro traded at $1.1359, little changed from Monday.
As far as the dollar is concerned, traders are watching Federal Reserve Chairman Jerome Powell’s semiannual congressional testimony, at which the Fed boss reiterated that the central bank would be patient when it comes to future interest-rate increases.
Follow: Live blog of Powell testimony before Senate panel
The ICE U.S. Dollar Index DXY, -0.15% was last down 0.1% at 96.319.
In economic data, December housing data saw housing starts and the Case-Shiller home price index ease from previous levels, while building permits were roughly flat from the prior number. The consumer confidence index beat expectations in February, at 131.4, versus 124.7 expected.
Against the Japanese yen USDJPY, -0.31% the dollar slipped 0.3% to ¥110.74, following a spike to a two-month high on Monday when risk appetite was rising on the back of optimism about U.S.-China trade relations. The yen typically fares well in times of waning appetite for assets perceived as risky because the currency is considered a haven.
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