It has been a volatile 24 hours for the British pound, with the last night’s Brexit vote culminating in a larger defeat than expected for Theresa May’s proposal and the prospect of a no confidence vote. Markets have taken a positive interpretation on this, that the government will have to take a more inclusive line and a softer Brexit that integrates closer with the EU.
The EUR/GBP dropped heavily yesterday and is holding those losses this morning as the strong pound outperformed a weak euro which is being weighed down by German growth concerns. The GBP/JPY endured a volatile session, but ultimately closed higher, with small losses this morning. There have been similar moves on the GBP/USD with small losses this morning following yesterday’s wide-ranging session that saw a dip below 1.2700.
The dollar index recovered off the lows yesterday amid Brexit volatility morning, with no significant change so far this morning.
The EUR/USD continues to struggle though, dropping to test support levels around 1.1400. The AUD/USD is unchanged and keeping up its tight gains.
The USD/CHF continues to recover, with a second day of gains on the cards so far this morning, with 0.9900 the next test. The USD/CAD is heading in the opposite direction though as traders bet on higher Canadian rates.
Yen pairs are mixed, with small losses for the USD/JPY so far today and follow on selling for the EUR/ JPY. The AUD/JPY is unchanged so far.
A no confidence vote in Theresa May is potentially taking place today at some point.
BOE governor Carney speaks at 09.15.
At 09.30, we have UK CPI, RPI and PPI.
The yen has been mixed this week, but the euro is showing increasing signs of weakness, centred around concerns for German growth.
There could be further downside for the EUR/JPY as this continues, with the flash crash lows a reasonable target.