{"id":148234,"date":"2019-05-23T06:50:03","date_gmt":"2019-05-23T10:50:03","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=148234"},"modified":"2019-05-23T06:24:32","modified_gmt":"2019-05-23T10:24:32","slug":"rising-political-risks-keep-both-the-euro-and-pound-on-the-back-foot","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2019\/05\/rising-political-risks-keep-both-the-euro-and-pound-on-the-back-foot\/","title":{"rendered":"Rising political risks keep both the Euro and Pound on the back foot"},"content":{"rendered":"
May 23, 2019<\/div>
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By Jameel Ahmad, Global Head of Currency Strategy and Market Research at ForexTime<\/a><\/strong>
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It\u2019s been a horrid month for Theresa May, as uncertainty around the fate of the UK Prime Minister and her Brexit plans have sent the Pound plummeting towards the 1.26 psychological mark. The departure of \u00a0Leader of the House of Commons, Andrea Leadsom, the 36th Ministerial resignation during May\u2019s reign as PM, highlights the draining support for May\u2019s Brexit deal, while raising the risk of a hardline Brexiteer potentially taking over the reins at 10 Downing Street.<\/p>\n

The GBPUSD\u2019s previous floor around the 1.30 level was predicated on the United Kingdom being able to avoid a no-deal Brexit. However, the doors to that psychological support level have been left wide open following the concerns from investors over the feared prospects of an increased worst-case scenario for Brexit.<\/p>\n

The ongoing political saga can by all means eventually lead to another general election or potentially a second referendum, with either outcome opening up the doors for further volatility in the Pound.<\/p>\n

Given the record losing streak in the Sterling that has seen the British currency drop against the Euro for 13 consecutive days, alongside the Sterling being the worst performing currency in the G10 this month with losses close to 3%, it is clear that the downside is where the Pound is the most vulnerable right now.<\/p>\n

European Parliament elections likely not enough to deter Euro\u2019s 2019 bearish trend<\/strong><\/p>\n

The European Parliament elections kick off Thursday and will go on through Sunday, adding another layer of risk to the Euro which has already declined by over 2.7 percent so far this year against the US Dollar. Should populist and Eurosceptics see gains at the polls, that is expected to exert more downward pressure on the Euro which is already suffering from the resumption of the Eurozone\u2019s economic woes.<\/p>\n

However, even a Euro-positive outcome from the elections and the shoring up of support for the EU establishment, will likely not be enough to significantly alter EURUSD\u2019s 2019 bearish trend.<\/p>\n

With both Brexit uncertainties and US-China trade tensions threatening to inflict more damage on the EU economy, any post-election reprieve for the bloc\u2019s currency would likely prove short-lived, as markets refocus attentions to macro global headwinds.<\/p>\n

EU, UK political uncertainties strengthen Dollar\u2019s support<\/strong><\/p>\n

With the Euro and the Pound accounting for a large proportion of the US Dollar Index (DXY), the political risks that are weighing on the EU and the UK are translating into support across the Atlantic for the US Dollar. The DXY was further supported by the latest Fed minutes, which indicated that the central bank is set to remain patient on US interest rates \u201cfor some time\u201d, while showing support for Fed Chair Jerome Powell\u2019s \u201ctransitory\u201d view on inflation.<\/p>\n

As the latest Fed minutes should push back against market expectations for lower US interest rates this year, this should have a subsequent downside limitation to the Greenback. As long as the US economy doesn\u2019t show meaningful signs of a sharper economic slowdown and the trade tension concerns continue to linger in the atmosphere, this should help support the \u201cresilient Dollar\u201d narrative.<\/p>\n

US-China tensions remain primary driver of global risk sentiment<\/strong><\/p>\n

Most Asian stocks are in the red on Thursday morning, as regional currencies turn in a mixed performance against the Greenback, as the region continues to showcase its sensitivity to the US-China trade outlook.<\/p>\n

Judging by how Gold has traded around the mid-$1,270 range this week, while USDJPY continues to hover above the psychological 110 level, markets appear to have priced in the recent deterioration in US-China relations, but remain on edge awaiting the next catalyst that could swing risk sentiment either way. Overall, the likelier base case for investors is that the US-China tensions will persist, which is a far cry from the prospects of a formalized US-China trade deal that anchored market expectations up until April.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

Disclaimer: <\/strong>The content in this article comprises personal opinions and should not be construed as containing personal and\/or other investment advice and\/or an offer of and\/or solicitation for any transactions in financial instruments and\/or a guarantee and\/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.<\/em><\/p>\n<\/div>\n

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\"Forex-Time-Logo\"Article by ForexTime<\/a><\/span><\/strong><\/p>\n

ForexTime Ltd (FXTM)<\/strong> is an award winning international online forex broker regulated by CySEC 185\/12 www.forextime.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By Jameel Ahmad, Global Head of Currency Strategy and Market Research at ForexTime It\u2019s been a horrid month for Theresa May, as uncertainty around the fate of the UK Prime Minister and her Brexit plans have sent the Pound plummeting towards the 1.26 psychological mark. The departure of \u00a0Leader of the House of Commons, Andrea […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-148234","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/148234","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=148234"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/148234\/revisions"}],"predecessor-version":[{"id":148241,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/148234\/revisions\/148241"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=148234"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=148234"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=148234"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}