Sterling Drops as May Signs Brexit Trigger for Process to Begin
By Patricia Lui and Netty Idayu Ismail
Sterling fell in early Asian trading as investors brace for the start of the two-year negotiation for the U.K. to leave the European Union.
The pound fell as much as 0.6 percent to 1.2377 per dollar, and was the worst performer among the Group-of-10 which saw muted trading. Some funds left it late in adjusting positions and then did so in poor liquidity, said a trader who asked not be identified as he isn’t authorized to speak publicly. Britain’s ambassador is expected to hand EU President Donald Tusk a letter at around 1:30 p.m. local time in Brussels invoking Article 50 of the Lisbon Treaty.
“Investors still nervous about the exit process are the likely sellers here,” said Mansoor Mohi-uddin, a strategist at NatWest Markets, a unit of Royal Bank of Scotland Group Plc. Otherwise, there isn’t any specific news out there that fueled the selling, other than Prime Minister Theresa May signing the letter to trigger Article 50, he added.
The dollar was mostly lower against its G-10 peers after Federal Reserve Vice Chairman Stanley Fischer said two more rate hikes this year “seems about right.” Clients are focused on both the momentum of the Fed and the U.S. consumer, said a sales desk currency trader in Asia who asked not to be identified as the person isn’t authorized to speak publicly.
- GBP/USD -0.4% to 1.2401, trimmed early losses on intraday profit taking and as dollar eased in view of UST yields retreating from session highs, an Asia-based FX trader says
- PM May will address lawmakers in London at about the same time the British ambassador hands her Article 50 letter to the EU president in Brussels
- AUD/USD +0.1% at 0.7644; pair was well bid via the crosses, particularly GBP and JPY, according to some FX traders
- Purchases against GBP was initiated today, buying against JPY was a continuation from flows that started out of Tokyo overnight, the traders say
- EUR/GBP rose to 0.8736 one-week high; gains triggered by the weaker pound with some of the cross flows attracting momentum and macro funds, according to an Asia-based FX trader