After appreciating earlier this month following a period of investors unwinding on USD positions, both the British pair/U.S. dollar (GBP/USD) and the euro/U.S. dollar (EUR/USD) currency pairs have attracted sellers as the month draws to a conclusion.
The U.S. Dollar Index is back at 100, a pivotal level. What happens here could have important implications for the major forex pairs, especially the Euro/U.S. dollar (EUR/USD) currency pair, at least in the short-term outlook anyway. The latter has been inching higher for the past five weeks now. It has managed to climb from a low of about 1.0340 at the start of the year to a high so far of 1.0770.
The British pound/U.S. dollar (GBP/USD) currency pair initially rose in the immediate aftermath of the Supreme Court’s decision that the parliament must hold a vote on Brexit. This was a predicable outcome. However, sterling then fell sharply as traders responded to news of additional ruling that the UK’s devolved assemblies will not have a vote on Brexit. But just as quickly, the currency then recovered most of its losses to trade near $1.25 again at the time of this writing.
Sterling skidded to its lowest levels—bar a "flash crash" in October—in 32 years on Monday, hit by fears that Prime Minister Theresa May will say on Tuesday that Britain is set for a "hard" Brexit out of the EU and its single market.
Traders hoping for volatility to pick up are likely to be lucky in the week ahead with many key moving events. For the past two months markets were dominated by the Trump trade but this has now clearly cooled down in the past two weeks with the U.S. equities and U.S. dollar pausing for a break.
Investors sold sterling and stocks in Europe and Asia on Monday, seeking shelter in gold and the Japanese yen as uncertainty over Britain's departure from the European Union and the policies of U.S. President-elect Donald Trump curbed appetite for risk.
The heightened hard Brexit fears have triggered a steep Sterling selloff during the early trading hours of Monday with the British pound/U.S. dollar (GBP/USD) currency pair tumbling to a fresh three-month low at $1.1983.
Stock markets were pressured during late trading on Monday after the heavy depreciation in oil prices soured investor risk appetite. Asian shares closed mixed on Tuesday as the terrible mixture of depressed oil, renewed China concerns and Trump jitters prompted traders to adopt a cautious stance.