The pound had a mixed day on Wednesday, climbing in the morning as the Britain’s main opposition party tried to introduce legislation to make it impossible for the UK to leave the EU without a deal. But it fell sharply in the afternoon after MP’s rejected the idea voting 309 to 298 in favour of leaving a no-deal on the table.
GBPUSD opened at 1.2728 and crept towards a 3-week high, eventually reaching 1.2751 but as news from parliament emerged, the pound dropped to a low of 1.2682.
Similarly, GBPEUR opened at 1.1233 and rose to 1.1266, the highest since last Friday but fell later in the day, touching a low of 1.1216 shortly before closing.
Conservative MP’s start the voting process today to find a successor to Theresa May as leader of the party and UK Prime Minister. In the first round today, any of the 10 candidates that fail to gain 17 votes will be eliminated. Further votes will take place next week eventually leaving the two most popular in a head to head contest with a winner expected to be announced towards the end of July.
The US dollar strengthened on Wednesday as US President Trump said he was optimistic about reaching a trade deal with China. Trump still plans to meet Chinese President Xi Jinping later this month at the G20 meeting in Japan and referred to the relationship with China as good but “testy”.
The euro came under pressure as Trump said was considering sanctions over the controversial Russian Nord Stream 2 gas pipeline which is set to feed natural gas from Russia to Germany. Trump warned Germany to not become reliant on Russian energy. Investors are also concerned that trade battles may spread to the Europe and Japan.
EURUSD opened at 1.1337 and gradually fell over the course of the day, falling to 1.1316 at lunchtime and then to 1.1284 shortly after the European session finished.
A recent fall in fall in risk appetite has boosted demand for the Japanese yen which hit a 1-week high against the US dollar of 108.295 this morning. The Australian dollar, seen an indicator of risk appetite fell to its lowest level against the yen since January as poor jobs data prompted investors to price in a 65% chance of an interest rate cut in July and a more than 80% chance of one by August or September.