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Sterling Tumbles as UK Seeks Irish Backstop Renegotiation, Dollar Awaits FOMC and Trade Talks

Sterling tumbled broadly as the UK opened a new chapter in Brexit negotiation with yesterday’s parliamentary amendment votes. In short, Prime Minister Theresa May needs to go back to EU to renegotiate the Irish backstop into alternative arrangements. But EU has repeated its stance on no renegotiation. For now it’s uncertain whether there could be on standoff on the issue. But so far, losses in the Pound are relatively limited as it stabilized in Asian markets.

At this point, Australian Dollar is the strongest one for today, as lifted by stronger than expected consumer inflation reading. New Zealand Dollar follows as the second. Canadian Dollar is also firm as oil prices rebound due to US sanctions on Venezuela. Swiss Franc, Yen and Dollar are the weakest ones. The greenback will look into today’s FOMC statement and press conference. Traders will also keep an eye on US-China trade talks, as high level meeting between Chinese Vice Premier Liu He and US Trade Representative Robert Lighthizer starts today in Washington.

Technically, EUR/GBP’s rebound tentatively suggests that 0.8620 key support is defended. Break of 1.3012 in GBP/USD will further indicate near term topping in the Pound. With today’s rebound, AUD/USD is now looking at 0.7235 resistance and break will confirm resumption of recent rebound from 0.6722 low.

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In other markets, Nikkei is currently down -0.29%. Hong Kong HSI is up 0.24%. China Shanghai SSE is down -0.01%. Singapore Strait Times is down -0.18%. Japan 10-year JGB yield is up 0.0033 at 0.007. Overnight, DOW rose 0.21%. S&P 500 dropped -0.15%. NASDAQ dropped -0.81%. 10-year yield dropped -0.032 to 2.712.

Sterling drops as UK seeks to reopen Brexit negotiation

Sterling dropped broadly after the Parliament voted 317 to 301 for Conservative MP Graham Brady’s Brexit deal amendment. Prime Minister Theresa is now required to go back to EU to renegotiate the deal to replace the Irish backstop with “alternative arrangements”. At the same time, the Parliament rejected Labour MP Yvette Cooper’s proposal to force Article 50 extension to avoid no-deal Brexit. Though, the symbolic amendments opposing no-deal Brexit was passed.

May’s spokesman said that “tonight parliament has sent a clear message that there is a way forward to secure this deal if we are able to secure changes in relation to the backstop.” And, “the EU’s position remains that they want the United Kingdom to leave with a deal. They want the UK to leave with a deal because it’s in their interests as well as those of the UK.”

However, EU repeated its stance that there will be no renegotiation. And, it’s uncertain what exactly alternative arrangements on the Irish border backstop are.

EU Tusk: Brexit withdrawal agreement is not open for renegotiation

On UK’s decision to seek Brexit deal renegotiations, European