Pound hit by volatility
The Tuesday session was dominated by the British pound and Brexit’s pending vote on how Britain will leave the European Union on March 29.
GBPUSD, -0.4411%, is experiencing a volatile morning marked by a sharp 2% swing between its high and low-point before the key vote in Parliament on Prime Minister Theresa May’s revamped Brexit deal.
The UK leader has received assurances at the last minute on the treatment of the Northern Irish border, which is at the heart of the Brexit issues, by European Commission President Jean-Claude Juncker on Monday. This initially supported the pound on Tuesday. Critics of May deal worry that special treatment at the border between Northern Ireland and the Republic of Ireland will leave U.K. de facto in the European Union.
Sterling became negative as UK Attorney General Geoffrey Cox said that although the changes May secured to her deal reduced the risk of the UK indefinitely being trapped in the customs union of the EU, it did not get eliminate legal risk, according to reports.
“Sterling took a nose dive on the back of the Cox statement. It was his opinion which matters the most, now that he has made it clear that the recent deal has no weight, the door is wide open for the sterling to move lower against the dollar,” said Naeem Aslam, chief market analyst at TF Global Markets.
The pound last bought $1.3012, down from $1.3149. Against the euro EURGBP, +0.8771% sterling also fell sharply, with the shared currency buying £0.8653, up 1.2%
“Another historic defeat is strongly on the cards for Mrs. May and all options are on the table with respect to another election or no Brexit at all. For us, we are looking at the support level of 1.2650 which the price can easily touch after the parliament’s vote.” Aslam added.
Earlier, US gross domestic product in January rose more than expected at 0.5%. Industrial production and manufacturing production for the same month also beat forecasts.
In other currencies, the U.S. dollar DXY, -0.12% was little changed at 97.249, while the euro EURUSD, +0.3024% was slightly stronger, buying $1.1252, versus $1.1245 late Monday.
Consumer-price index figures for February are on the U.S. economic calendar for 8.30 a.m. Eastern.