The Euro and Sterling continued to weaken against the Dollar as markets look beyond the headlines. The EUR/USD cross had been stable during the morning session but has fallen to 1.137 following European Central Bank president Draghi’s post policy meeting press conference. Markets initially reacted positively to the ECB’s decision to keep its policy rates unchanged and to stick to its forecast that the next rate hike would take place after summer 2019. But the Euro quickly gave way as Draghi warned of the risks to the Eurozone from Brexit negotiations which had stalled and the lingering issue of Italy’s draft 2019 budget.
Sterling has fared even worse, with GBP/EUR falling back below 1.13. The news overnight was that British Prime Minister Theresa May had managed to convince parliamentary members of her ruling Conservative Party to give her more time to come up with an acceptable Brexit deal. But while she has postponed a potential leadership contest for now, markets are still seemingly nervous that should the British government fail to put forward a Brexit deal acceptable to both the European Union and the British parliament, the UK faces the unsavoury prospect of the UK exiting the EU in March without a deal in place.
