Sterling Holds Steady Following News of Brexit Extension

Camila Martinez
UK and EU flag

The major news for forex traders overnight was the extension the EU has granted to Great Britain in relation to Brexit.

British Prime Minister Theresa May has now agreed to a new deadline of 31st October 2019 for the country she leads, to exit the EU.

Although many who pursue forex trading as a career may have worried the news would see sterling plummet, the British currency actually held fairly steady overnight.

Many currency trading experts feel this is due to the threat of a no-deal Brexit situation being put on hold for a while now.

It may also see PM May having the extra time needed to come to an agreement with Parliament and the EU for the UK to leave in good order.

However, this does not mean sterling is out of the woods in terms of forex trading though.

There still remains the possibility of Prime Minister May resigning her position due to the failure to get a Brexit deal done and the extended uncertainty this extension brings to the whole UK economy.

As a result, sterling stuck around the $1.31 mark overnight in its pair with the US dollar following news of the new Brexit deadline.

Speaking about last night’s announcement, Chris Turner, Head of Foreign Exchange Strategy at ING said: “the extension is unlikely to improve business confidence much, thus limiting the upside to GBP.

The rising probability of a change in Conservative Party leadership ahead of the new October deadline suggests a difficulty for EUR/GBP to move below the 0.85 pence level”.

Naturally, this is key news for anyone trading in currency pairs where the pound is involved – especially against the US dollar or euro.

For now, it seems the market is flat in terms of sentiment around the pound – at least in the short term.

It was not just sterling that saw a relatively steady forex session on Thursday, 10th April 2019.

News released from the US Federal Reserve and European Central Bank also saw a quiet day for the US dollar and euro.

Both institutions signalled that they would be leaving interest rates unchanged due to rising global trade tensions and signs of a slowdown in growth.

For the US Fed, this was in the form of minutes released from their March 19th-20th meeting where they had agreed not to raise US interest rates in 2019.

The news from the ECB saw euro prices hold around the $1.1276 mark in its pair with the US dollar, which was a recovery from Wednesday’s low of $1.2295.

The major event that many forex traders are looking ahead to this week is the latest economic news from China.

The market is eagerly waiting to see the figures around Chinese trade on Friday, 12th April 2019, and then its first-quarter gross domestic product figures next week.

As China is such a big global player in terms of the whole world’s economy, any data reported could have an impact on many major currency prices, including the US dollar, euro and British pound.

However, any results out of China will also have a profound effect on the Australian dollar due to their extensive trade with China.

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