The pound headed for its longest winning streak in two months before Theresa May takes over as U.K. prime minister later Wednesday, ending the political uncertainty after the country’s vote to leave the European Union prompted David Cameron to step down.
The British currency rose as much as 0.7 percent to $1.3338, the highest level since July 4, and was 0.5 percent stronger at $1.3313 as of 7:03 a.m. in London. It climbed for a fourth day, the longest rally since May 19, rebounding from a 31-year low in the immediate aftermath of last month’s Brexit referendum. Economists expect the Bank of England to lower interest rates Thursday, capping the pound’s advance.
May has indicated that the formation of a new Brexit department with a secretary of state at its helm will be one of her first announcements. Finding the right person for the job is 59-year-old leader’s most important task. Fellow EU leaders have said they want talks to begin quickly, and for the U.K. to set out its demands. May, on the other hand, is in no hurry, and has said what she wants: market access without immigration.
“The pound is supported by views that May won’t rush to begin the process toward the exit, reducing concerns about immediate negative consequences,” said Kengo Suzuki, chief currency strategist at Mizuho Securities Co. in Tokyo. “The removal of political uncertainty is bringing back some sense of stability after the post-Brexit turmoil.”
Fed's Mester heartened by U.S. job rebound in June
The sharp rebound in U.S. job growth last month eased concerns that the country's labor market had regressed, a top Federal Reserve official said on Wednesday, repeating she continues to expect gradual interest rate rises.
Cleveland Fed President Loretta Mester, speaking in Sydney, largely repeated a July 1 speech in London in which she said it was too early to judge the full effect of Britain's vote to leave the European Union on the U.S. economy.
However Mester, a relatively hawkish official who has a vote on U.S. monetary policy this year, noted the recent data on the U.S. labor market was heartening.
China's exports/imports fell more than expected
China's exports fell more than expected in June as global demand remained stubbornly weak and as Britain's decision to leave the European Union clouds the outlook for one of Beijing's biggest markets.
Imports also shrank more than forecast, indicating the impact of measures to stimulate growth in the world's second-largest economy may be fading, after encouraging import readings in May.
Exports fell 4.8 percent from a year earlier, the General Administration of Customs said on Wednesday, adding that China's economy faces increasing downward pressure and the trade situation will be severe this year.
Imports dropped 8.4 percent from a year earlier.
That resulted in a trade surplus of $48.11 billion in June, versus forecasts of $46.64 billion and May's $49.98 billion.
Economists polled by Reuters had expected June exports to fall 4.1 percent, matching May's decline, and expected imports to fall 5 percent, following May's 0.4 percent dip.
Crude futures fell
Crude futures fell on Wednesday as investors locked in gains after oil prices surged nearly 5 percent in the previous session, partly on forecasts from the U.S. government and OPEC that demand would increase next year.
Oil prices were also under pressure from industry data that showed a surprise build in U.S. crude stocks, price gains in other commodities including gold and a stronger U.S. dollar which gained against a basket of currencies .DXY, analysts said.
"We are on the cusp of U.S. weekly production statistics - the market is keeping a close eye on that. There is maybe a little bit of profit taking ahead of the stats," said Ben Le Brun, market analyst at Sydney's OptionsXpress.
Brent futures LCOc1 fell 55 cents to $47.92 a barrel as of 0655 GMT after settling up $2.22, or 4.8 percent, in the previous session.
U.S. crude CLc1 dropped 46 cents to $46.34 a barrel after ending the previous session up $2.04, or 4.6 percent.
Reference: Bloomberg, Reuters
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