On Friday the pound fell below $1.28 for the first time since February as market optimism for a softer Brexit starts to fade once again. London Capital Group’s Jasper Lawler explains why markets are worried: “Given the Tories’ sharp losses in the polls and the Brexit party’s dominance in polling for European elections, a hard-line Brexiteer Prime Minister is becoming more likely. “The overriding fear for currency traders is that this means that a hard no deal Brexit is back on the table as an option.” Meanwhile, Labour leader Jeremy Corbyn today confirmed that Brexit cross-party discussions between the Conservatives and Labour are done after six weeks of fruitless discussion.
It is now said that Prime Minister Theresa May and Labour leader Jeremy Corbyn will discuss how to find a consensus among MPs through a series of votes.
On Thursday the Prime Minister promised she would set a timetable for her departure following the next Brexit vote in June.
Meanwhile, the US dollar is close to a two-week high against a basket of currencies thanks to a range of strong ecostats.
On Thursday, data revealed that US housing starts rose to a higher-than-forecast 5.7 per cent in April, giving the greenback a little nudge higher.
March’s housing starts were revised higher from 1.269 million to 1.288 million which provided further support to the struggling US housing market.
This likely provided the US dollar with an upswing of support while Brexit uncertainty weakened sentiment in Sterling.
At the same time, ongoing trade war fears have seen investors rushing into the safe-haven US dollar to escape the turbulence caused by the ongoing US-China spat.
Looking ahead to the start of next week, the US dollar could slide against the pound following the release of the Chicago Fed National Activity Index.
If the index slides further than forecast in April, it could dampen sentiment in the dollar.
Meanwhile, later in the day the Federal Reserve’s Chairman Jerome Powell is due to give a speech.
If Mr Powell’s tone is hawkish about the outlook for the US economy, the US dollar could be further buoyed against Sterling.