(Reuters) -The British pound dipped against the dollar on Tuesday but gained slightly against the euro and yen, which remained under pressure due to political uncertainty and fiscal concerns in France
Sterling slips against dollar, gains on both euro and yen
Current Trends in Currency Exchange Rates
(Reuters) -The British pound dipped against the dollar on Tuesday but gained slightly against the euro and yen, which remained under pressure due to political uncertainty and fiscal concerns in France and Japan.
Impact of Political Events on Currency
Sterling was down 0.3% against the dollar at $1.3441, but remains within its recent range.
Bank of England's Influence on Sterling
"It's quiet for sterling at the moment," said Mohamad Al-Saraf, forex research associate at Danske Bank, who noted that attention in the currency market was largely elsewhere.
"We are awaiting a new catalyst, so we could see some range trading in the near term," he added.
POUND CATALYSTS
Bank of England chief economist Huw Pill is scheduled to speak tomorrow, and fellow rate-setter Catherine Mann is speaking on Thursday. Both Pill and Mann voted with the majority to keep interest rates unchanged at the last BoE meeting in September.
Money market traders are pricing in under three basis points of easing at the next meeting in November, implying about a 10% chance of a quarter point cut.
The next reduction is not fully priced until April next year.
Against both the euro and the yen, the pound was up about 0.1%, extending on the gains from the previous day, when political developments rocked both currencies.
POLITICAL SHOCKS IN JAPAN AND FRANCE
In Japan, Sanae Takaichi won the race to become the next Liberal Democratic Party leader, and in turn, is set to be named the new prime minister.
Takaichi has pledged to jolt the Japanese economy with aggressive spending and has been critical of the Bank of Japan's interest rate hikes. Her victory over the weekend sent the yen tumbling on Monday, and the currency remains on the backfoot.
The unexpected resignation of French Prime Minister Sebastien Lecornu on Monday also triggered weakness in the euro, which has continued on Tuesday.
The currency, which has largely weathered France's political turmoil in the last 18 months, remains under pressure as the political uncertainty makes fiscal consolidation less likely.
ING head of forex strategy Chris Turner said currency investors will be watching the spread between German and French 10-year bond yields, a measure of the risk premium investors demand to hold French debt. The spread reached its widest level since January on Monday at 88 basis points.
"A move through 90 bps would raise some alarm bells and add to some independent weakness in the euro," Turner said in a note.
(Reporting by Samuel Indyk; Editing by Joe Bavier)
