The British pound rallied versus its main rivals on Wednesday after the European Union’s lead negotiator Michel Barnier said Brussels was willing to offer the U.K. an unprecedented partnership.
Barnier said the EU’s relationship with Britain following the latter’s March 2019 withdrawal from the union will be “such as has never been with any other third country,” according to Reuters.
Sterling
GBPUSD, +0.9556%
rallied to $1.2988, compared with $1.2872 late Tuesday in New York.
The British currency also strengthened against the euro
EURGBP, -0.8805%
, with the shared currency falling to £0.9007 per euro, down almost 1% from Tuesday.
The news weighed on the U.S. dollar, which was last down 0.1% as measured by the ICE U.S. Dollar Index
DXY, -0.07%
. The gauge, which compares the greenback against six rivals last stood at 94.669. The currency found little traction from a report showing second-quarter GDP was revised up to 4.2% from the 4.1% initially reported.
The euro pulled back from a one-month high versus the dollar on Wednesday, but benefited some from the weakening dollar as the session went on. Investor worry about Italy’s budget plans and possible ripple effects for European assets weighed on the shared currency.
The euro
EURUSD, +0.0684%
last traded at $1.1697 versus a level of $1.1695 late Tuesday. The shared currency has had a few volatile weeks, noted Kathy Lien, managing director at BK Asset Management:
“In the past two weeks, we’ve seen a dramatic recovery in the euro. The single currency appreciated more than 4 cents in a move that took the pair from its one-year low of $1.13 to a three-week high of $1.1733. The recovery was driven by the decline in the U.S. dollar, improvement in risk appetite, softer U.S. economic reports, stronger German data and short covering.”
The euro’s main problems, market participants said, was uncertainty surrounding Italy’s budget plans and economy, as reflected in spikes in Italian 10-year government bonds yields
TMBMKIT-10Y, -2.12%
as well Wednesday.
Read: The 60 events that could rattle stock markets and investors in the months ahead: Nomura
Italy may ask the European Central Bank to engage in further quantitative easing to create appetite for Italian bonds, according to multiple news reports including Italian daily La Stampa.
Archive: Here’s why Italy and financial markets are still headed for a showdown
The country’s Prime Minister Luigi Di Maio Tuesday said Italy could breach the 3% deficit target set by the European Union in 2019. That in turn could prompt Italy’s sovereign credit rating to get downgraded, which could have a ripple effect across European assets, including the euro, analysts said. Italy is one of Europe’s largest economies, and market participants worry that its economic woes won’t be as easily dealt with as those of Greece in the past decade.
Meanwhile in North America, trade remains the focus after President Donald Trump hailed a bilateral agreement with Mexico earlier in the week. U.S. and Canadian officials are now negotiating in Washington. The three neighboring nations are currently connected under the North American Free Trade Agreement, which has been under renegotiations for more than a year now.
Don’t miss: Here’s why the Canadian dollar is holding its ground
Ottawa was ready to budge on its dairy supply management to secure an agreement with the U.S., which is its biggest trade partner, according to a report by The Globe and Mail. This could result in the U.S. gaining more access to the Canadian dairy industry
One U.S. dollar last bought C$1.2949
USDCAD, -0.0387%
up from C$1.2931 late Tuesday.
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Source : MTV
