The pound declined against its major counterparts in the European session on Tuesday, as U.K. cabinet meeting kicked-off amid deep divisions over whether the government should opt for no-deal Brexit, if Prime Minister Theresa May couldn’t pass her Withdrawal Agreement Bill through Parliament next month.
While Commons leader Andrea Leadsom suggested the UK must be “prepared to walk away,” Philip Hammond is set to warn that “all the preparation in the world will not avoid the consequences of no deal.”
The withdrawal deal, which will be put to a vote in Parliament in the week of June 3, faces tough challenges following the failure of cross-party talks last week.
Uncertainty over the approval of Brexit Withdrawal Agreement by the Parliament as well as the chance of a hardline Brexiteer replacing PM May has been weighing on the pound since last week.
Meanwhile, European markets advanced after the U.S. government temporarily eased some trade restrictions imposed on Chinese telecomunicatioms equipment company Huawei Technologies.
The U.S. Commerce Department will now allow the Chinese technology major to purchase US goods in order to maintain existing networks and provide software updates to existing Huawei handsets.
However, Huawei will not be allowed to buy American parts and components to manufacture new products without license approvals.
The Industrial Trends survey from the Confederation of British Industry showed that UK manufacturing orders hit its lowest level since October 2016.
The order book balance dropped to -10 percent from -5 percent in April. At the same time, the export order books balance slid to -16 percent, the lowest since July 2016.
The currency traded mixed against its major counterparts in the Asian session. While it held steady against the greenback and the euro, it rose against the yen and the franc.
The pound slipped to more than a 3-month low of 0.8789 against the euro, from a high of 0.8764 hit at 2:00 am ET. The pound is likely to test support around the 0.89 region.
The pound weakened to 1.2685 against the greenback, its lowest since January 15. This follows a high of 1.2732 touched at 7:30 am ET. If the pound drops further, 1.25 is possibly seen as its next support level.
After rising to 1.2862 against the franc at 2:00 am ET, the pound reversed direction, touching a 4-month low of 1.2812. The pound is seen finding support around the 1.27 region.
The pound that ended Monday’s trading at 140.01 against the yen declined to a 4-day low of 139.65. Next key support for the pound is seen around the 137.00 level.
Looking ahead, Eurozone flash consumer sentiment index for May is due at 10:00 am ET.
At the same time, U.S. existing home sales for April are scheduled for release.
Chicago Fed President Charles Evans will speak about the economy and monetary policy at the Financial Markets Conference in Florida at 10:45 am ET.
At 12:00 pm ET, Boston Fed President Eric Rosengren will give a speech at the Economic Club of New York.
The material has been provided by InstaForex Company – www.instaforex.com
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