Pound Drops on Hard Brexit Fears, US Dollar Eyes Fed-Speak
- British Pound slumps as UK PM May revives “hard Brexit” fears
- Australian Dollar follows local shares higher amid risk-on trade
- Cautious Fed-speak may cool rate hike bets, weigh on US Dollar
The British Pound is underperforming in otherwise quiet trade at the start of the trading week, roiled by comments from UK Prime Minister Theresa May over the weekend. May rekindled worries about a “hard” Brexit – wherein the UK would lose access to the EU single market – in an interview with Sky TV. She said her priority is to negotiate the best possible UK/EU trade deal while remaining firmly outside the regional bloc rather than find ways to keep bits of membership intact.
The Aussie Dollar outperformed, rising alongside the benchmark S&P/ASX 200 stock index. The broadly upbeat tone appeared to be supportive for the sentiment-linked currency. Australian shares outperformed amid a broadly upbeat mood across Asian equity exchanges, albeit in rather thin conditions as Japanese markets remained shuttered for a holiday.
The spotlight turns to Fed commentary from here. Boston and Atlanta Fed Presidents Eric Rosengren and Dennis Lockhart are due to speak. Resurgent Fed rate hike speculation triggered by Friday’s jobs report – specifically, the jump in wage growth to a cycle high of 2.9 percent on-year – may see some pushback if their remarks mirror the cautious tone on display in minutes from December’s FOMC meeting. The US Dollar may give back some recent gains in this scenario.
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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