Pound stumbles as traders await US Federal Reserve meeting
The British pound slumped to an eight-week low point Tuesday on Brexit concerns, while markets were cautious overall ahead of a much-anticipated Federal Reserve policy meeting.
Sterling slid to $1.2110 at one point, the lowest level for two months, lending support to London’s benchmark FTSE 100 stocks index that features numerous multi-nationals earning in currencies other than the pound.
“The pound has taken a sharp drop,” said Kathleen Brooks, research director at City Index.
She added that “the reality of the UK’s divorce from Europe and two years of horse-trading to agree trade deals is beginning to spook the forex market”.
British Prime Minister Theresa May will make a major statement to parliament on Tuesday after MPs enabled her to start the withdrawal process from the European Union.
After weeks of wrangling, lawmakers on Monday finally granted May the right to trigger Article 50 of the EU’s Lisbon Treaty, which would start the two-year divorce process with the bloc.
Elsewhere in Europe, there is unease about Wednesday’s elections in the Netherlands that far-right anti-EU nationalists are predicted to score well in.
Elections in France and Germany later in the year are also keeping investors on edge, with populists in both countries threatening the status quo.
All eyes Tuesday were also on the Fed.
While a string of upbeat US economic readings in recent months has made a hike in interest rates at Wednesday’s gathering an odds-on bet, there is uncertainty about its outlook beyond the meeting.
“Markets fully expect a rate rise, so market reaction is likely to be muted unless the Fed disappoints, which would lead to… a lower dollar,” Mike Bell, global market strategist at JP Morgan Asset Management, wrote in a note to clients.
“All attention is likely to be focused on the press conference to see whether a more hawkish tone is struck” that could see further US rate rises this year.
In Asia on Tuesday, Tokyo’s benchmark stocks index ended 0.1-percent lower.
But struggling industrial giant Toshiba reversed an earlier near-nine percent slide to end slightly higher after it was given approval to delay the release of its earnings results and said it was considering selling a majority stake of its loss-making US nuclear unit.
The firm had been hammered as news it would not release its numbers Tuesday raised fears it could be yanked from Japan’s premier stock exchange.
The delay stems from an investigation into the US subsidiary, Westinghouse Electric, the Nikkei business daily said.
– Key figures around 1130 GMT –
London – FTSE 100: UP 0.2 percent at 7,384.79 points
Frankfurt – DAX 30: FLAT at 11,995.26
Paris – CAC 40: DOWN 0.2 percent at 4,991.36
EURO STOXX 50: DOWN 0.2 percent at 3,409.55
Tokyo – Nikkei 225: DOWN 0.1 percent at 19,609.50 (close)
Hong Kong – Hang Seng: FLAT at 23,827.95 (close)
Shanghai – Composite: UP 0.1 percent at 3239.33 (close)
New York – Dow: DOWN 0.1 percent at 20,881.48 (close)
Euro/dollar: DOWN at $1.0637 from $1.0654 Monday
Pound/dollar: DOWN at $1.2134 from $1.2222
Dollar/yen: UP at 115.04 yen from 114.86 yen
Oil – Brent North Sea: UP 44 cents at $51.79 per barrel
Oil – West Texas Intermediate: UP 34 cents at $48.74