Market News
Pound weakens as dollar strengthens amid political uncertainty - YAHOO FINANCE
Pound (GBPUSD=X, GBPEUR=X)
The pound dipped 0.3% against the dollar (GBPUSD=X) on Tuesday morning, to trade at $1.344 at the time of writing, with sterling continuing to face pressure from a stronger greenback.
The US dollar index (DX-Y.NYB), which tracks the greenback against a basket of six currencies, was up 0.3% at 98.37 at the time of writing.
Chris Turner, global head of markets and regional head of research for UK & CEE at ING (ING), said that the dollar index "should remain range-bound, but with a slight upside bias given developments in Japan and France". Both the Japanese yen and the euro are included in the US dollar index basket of currencies.
The yen weakened against the dollar (JPYUSD=X) on Tuesday, following Sanae Takaichi's victory in the Liberal Democratic Party leadership contest, with her expected to become Japan's next prime minister.
In a note on Monday, Capital Markets chief markets economist John Higgins, said: "Takaichi is widely seen as an equity market-friendly champion of the policies of the late Japanese prime minister Shinzo Abe, the three ‘arrows’ of which were loose monetary policy, fiscal stimulus and structural reform."
He said that this helped explained the drop in the yen against the dollar and the surge in Japanese stocks following her victory.
"After all, Japan’s currency plunged and its stock market outperformed its US counterpart significantly in local-currency (LC) terms in the early years of ‘Abenomics’," Higgins said.
Meanwhile, the euro also weakened against the dollar (EURUSD=X), amid political turmoil in France, following prime minister Sebastien Lecornu resigned after less than a month in the job.
Jim Reid, head of macro and thematic research at Deutsche Bank (DBK.DE), said: "[President Emmanuel] Macron has asked Lecornu to continue consultations with party leaders to 'define a platform for stability' and report back by tomorrow evening, but the political arithmetic remains unforgiving even if there's an outside chance he salvages something."
The pound was steady against the euro (GBPEUR=X) on Tuesday morning, trading at €1.1503 at the time of writing.
