MTS Help Center

·         The British pound struggled to stay afloat in Asian trade on Friday having suffered a tumultuous slide overnight, as investors feared political turmoil in the country could see it crash out of the European Union without a divorce deal.

Both the dollar and the yen benefited from a deepening crisis for UK Prime Minister Theresa May after the resignation of key ministers from her government imperilled her Brexit plan.

·         That left the sterling vulnerable to further losses. It was changing hands at $1.2792, barely holding steady after declining 1.7 percent on Thursday, its steepest percentage slide since Oct. 11 2016.

·         “Political troubles are never good for the currency but in the case of the UK, the pound could drop to 1.25 versus the dollar on the prospect of a no deal Brexit, leadership challenge and slower growth,” Kathy Lien, managing director of currency strategy at BK Asset Management said in a note.

·         The resignations, including that of Brexit minister Dominic Raab, came hours after May had claimed backing for a draft divorce deal. The hostility from government and opposition lawmakers raised the risk that the deal would be rejected in parliament, and that Britain could leave the EU on March 29 without a safety net.

·         Without a deal, the UK would move in March from seamless trade with the EU to customs arrangements set by the World Trade Organization for external states, which could cause panic in financial markets.

However, some analysts believe sterling bulls have a reason not to throw in their towel yet, noting there is a chance of another referendum with the choice between a hard Brexit and remaining in the EU.

·         A snap Sky News poll yesterday showed 55 percent in favour of another referendum, while 54 percent supported no Brexit, 32 percent a hard Brexit and only 14 percent May's deal.

·         The dollar index, a gauge of its value versus six major peers, was up 0.05 percent at 96.97, not far off a 16-month high of 97.69 hit at the start of the week.

·         Currency markets were also keeping an eye on the U.S.-Sino trade tensions as traders looked for concrete signs the economic powers were seeking to de-escalate their dispute.

·         Most analysts forecast the dollar to remain well supported in coming months thanks to the Federal Reserve’s commitment to continue to gradually raise interest rates. A fourth hike for this year is expected next month, backed by a robust economy and rising wage pressures.

·         According to the report, auto sales was a significant driver of consumer spending last month. For some economists the strong October report, ending two months of declines sets expectations for a strong holiday shopping season.

·         “There are plenty of worries about slowing global growth these days, but don't tell that to American shoppers, who were still out on a spending spree at stores in October,” said Avery Shenfeld, senior economist at CIBC World Markets. “Look for consumer spending to remain a healthy growth contributor for Q4 as a whole, helped by better wages and ongoing job growth, but the quarter/quarter impacts of tax cuts are fading from these numbers relative to what we saw in the spring.”

·         Although consumers continue to spend, Michael Pearce, senior U.S. economist at Capital Economics said that they are starting to see slowing momentum, which will start to impact economic growth next year.

“With consumer confidence still high, much of this extra cash is likely to filter through to spending on other goods and services,” he said. “But we doubt that will be enough to replace the boost from the earlier fiscal stimulus or offset all of the headwind from tighter monetary policy. Accordingly, consumption growth still looks set to slow next year.”

·         China’s written response to U.S. demands for trade reforms is unlikely to trigger a breakthrough at talks between Presidents Donald Trump and Xi Jinping later this month, a senior Trump administration official told Reuters on Thursday.

·         France is preparing various measures, notably those dealing with customs controls and checks at ports, in case there is no Brexit deal, said French transport minister Elisabeth Borne.

·         Japan’s exports likely rebounded in October after falls led by a series of natural disasters, a Reuters poll found on Friday, but worries over global demand and the U.S.-China trade war linger.

·         Oil prices rose on Friday amid expectations of supply cuts from OPEC, although record U.S. production dragged.

Brent crude oil futures were at $67.49 per barrel at 0747 GMT, up 87 cents, or 1.3 percent from their last close.

U.S. West Texas Intermediate (WTI) crude oil futures were at $56.96 per barrel, up 50 cents, or 0.9 percent.

·         Prices were mainly supported by expectations the Organization of the Petroleum Exporting Countries (OPEC) would start withholding supply soon, fearing a renewed rout such as in 2014 when prices crashed under the weight of oversupply.

Reference: Reuters, Kitco