Last night the pound dropped to its lowest level against the greenback over concerns that the U.K. is set to exit from the European Union by prioritizing immigration concerns over single-market membership. The pound touched its lowest level since Oct. 25 before rebounding to trade little changed at 1.2174 per dollar.
Some analysts are now anticipating that the pound could drop as low as 1.10 if the most severe exit is pursued.
In the meantime attention will turn to Bank of England Governor Mark Carney’s testimony to the U.K. Parliaments Treasury Committee tonight. Expectation is that should the inflation expectation exceed the BoE’s 2% target then Carney may suggest a move away from the current easing cycle. The pound could then rebound from it’s current levels to it’s technical resistance at 1.2270.
Against other major currencies, the greenback eked small gains ahead of President-elect Donald Trump press conference to be held today. Traders are taking a risk-off attitude pending further clues on the potential for near-term fiscal stimulus and changes in trade policy with major partners, that may have implications for global growth.
There were wide swings in the USD/JPY with the currency rising to a fresh high early in the day, only to drop back near the overnight low before ending at 115.79, a round trip of 200 points overall.
In equities, the the S&P 500 Index closed little changed, while the Dow fell from session highs as investors focused on the forthcoming fourth-quarter earnings reporting season. The S&P 500 closed at 2,268.90 as of 4 p.m. in New York, after erasing all of a 0.5 percent advance.
In commodities, WTI crude dropped 2.2 percent to a three-week low amid speculation U.S. crude supply is rising despite perceived compliance by OPEC on promised production cuts. Oil slipped to $50.82 a barrel after sinking 3.8 percent in the previous session.
Gold futures rose 0.1 percent to settle at $1,185.50 an ounce, the highest close since Nov. 29 due to demand forecast of a rise ahead of Chinese New Year.
