With little data or new news for markets to sink their teeth in, the Dollar’s recovery extended today after having weakened by almost 1% between 12th and 18th November. The market seemingly took its cue from Fed Vice-Chairperson John Williams who yesterday maintained a hawkish rhetoric, arguing that further Fed rate hikes were justified and necessary. This was somewhat in contrast to a number of FOMC members who in scheduled speeches last week had struck a more balanced tone and sewed some seeds of doubts as to whether the Fed would hike rates 25bp at its December as priced in by markets.
As a result, the GBP/USD cross fell back toward 1.28, with the down-move given more impetus by news that the ruling Conservative Party’s partner, the Northern Irish Democratic Union Party (DUP), would not support the government’s proposed draft Brexit deal in a parliamentary vote likely to take place in mid-December. So while Prime Minister May’s position looks secure for now, she still faces an uphill battle to convince parliament, where her party is short of a majority, to vote in favour of a deal which has been lambasted by both Remainers and Leavers.
