Sterling Weakens as Brexit Remains Confusing

The dollar continues to trade firm against the British pound as traders are digesting confusing headlines surrounding Brexit.

The President of France, Emmanuel Macron, said on Friday, that an extension for the October 31 deadline for the United Kingdom to leave the European Union was not justified right now.

Then the European Union said that they were considering a flexible three month extension. On Thursday, Prime Minister Boris Johnson called for elections.

The GBP/USD currency exchange rate, after the news on Friday, saw the dollar rising to a 5 ½ month high price point against the British pound to trade at 1.281.

The pound, during the early Asian trade session on Monday, remains on the defensive.

The British pound fell over one and a half percent, last Monday, after UK Boris Johnson’s timetable to pass legislation for the United Kingdom to exit the European Union with a deal in place, was rejected by the UK Parliament. This led to PM Johnson to request an extension from the EU.

Despite the Brexit drama, the UK’s currency fall lower has been rather limited as a no-deal exit has been ruled out. The GBP is still up 4.3 percent for October.

The EUR/GBP Forex market is up 0.17 percent to trade at 0.8655.

The EUR/USD currency exchange rate was also trading a bit lower during the Asian trade session.

Forex Traders Support High Yield Forex Assets at the Expense of the British Pound

There has been a higher level of capital flow into higher yielding currencies from the emerging markets as safe haven Forex units like the Swiss franc and Japanese yen lost appeal as market sentiment improved.

Political turmoil in the United Kingdom is also causing volatility with the Sterling dollar. Prime Minister Boris Johnson wants snap elections scheduled for December 12 to consolidate his mandate. His Conservative Party is leading in the polls.

Traders are shifting attention to this week all important Federal Open Market Committee (FOMC) meeting scheduled for October 30-31. The FOMC, the monetary policy arm of the U.S. Federal Reserve, is expected to cut their Fed Funds rate by 25 basis points.