The British pound sterling was preparing for an uncertain ride today as a key Brexit debate in the country’s Parliament is scheduled for this afternoon.
Prime Minister Theresa May’s new strategy for leaving the European Union has been circulating in the last week or so, and she has been trying to boost support for it among her MPs.
However, it’s not certain that she will receive the votes of all the parliamentarians in her party; and if a rebellion on that scale happens, her position could weaken further.
The debate begins at 2.30pm GMT, and forex markets are likely to be closely watching the pound charts. But while rebellions against May could lead to forex investor jitters for the typical reason of political instability, there are deeper reasons why this particular political crisis could have an impact.
The rebels are, primarily, pro-Brexit. If they are successful, they may manage to force May to take a harder approach to Brexit – which is the markets’ least-preferred outcome, and which could force a double whammy of trouble on to May.
In other forex news, the East Asian and Oceanic economies found themselves suffering.
In China, the gross domestic product growth rate dropped to 6.7% in the most recent quarter of 2018, which is down 0.1% on its performance compared to the previous quarter. This comes both as a result of the continued persistence of American tariffs on a wide range of Chinese goods, but also as a result of tightened demand for high-risk borrowing.
As is common with jitters in the Chinese markets, economies in the wider region which rely on China’s demand for goods saw the effects first-hand. The Australian dollar, for example, dropped to 0.7410.
Over in Japan, meanwhile, the yen suffered at the hands of the dollar – and the USD/JPY pair rose ahead of the 112.50 mark.
However, the relatively strong American performance at the moment comes as a result of other forces too.
A report from National Bank Financial said, for example, that it suspects industrial production rates in the US may have gone up last month – a move likely to have contributed to increased dollar buoyancy.
Further major economic events are expected in the USA this week. June’s housing data is set to come out, although it is expected that these figures may be somewhat low – in part due to the fact that the last releases showed particularly strong growth rates. Retail sales figures are also coming out this week in the USA, and analysts are expecting that they will continue to rise.
In addition, the chair of the USA’s central bank – the Federal Reserve – will speak in front of a key Congressional committee on the topic of the economy. Jerome Powell is set to deliver the speech, which he does twice a year, to the Senate Banking, Housing, and Urban Affairs Committee. As this speech also focuses on monetary policy, forex speculators who are interested in the impact of potential rate changes are likely to be watching for clues.