Pound’s Brexit Woes and Japan’s PM Vote Are in Focus Despite Weakening of the US Dollar 

  • On Monday morning in Asia, the dollar was down but the focus is centered on the British pound and Japanese Yen.

    The pound is in the mercy of over increasing fears of a hard Brexit. In Japan, the ruling party will vote in a new leader later in the day, with the winner widely expected to replace incumbent prime minister Shinzo Abe.

    The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged down 0.16% to 93.192 by 11:57 PM ET (4:57 AM GMT) and rolled over to the December contract on Sunday.

    Investors are eyeing out the U.S. Federal Reserve’s Policy Meeting which is scheduled for Wednesday with further monetary easing widely expected. But some investors cautioned against setting those expectations too high.

    “Having set aside yield curve control as a near-term policy option, the FOMC does not seem ta have an operational consensus on how to use the balance sheet,” Standard Chartered (OTC: SCBFF) Bank strategists said in a note.

    “This may disappoint investors,” they added.

    On Thursday, other central banks, including Bank of Japan and Bank of England, are due to announce their policy decisions.

    The GBP/USD pair was up 0.22% to 1.28, despite fears that the U.K. would exit from the European Union (EU) with no trade deal mounting and putting pressure on the pound.

    London acknowledged during the previous week that it could break international law “in a very specific and limited way.” The comments led to backlash from European Commission president Ursula von der Leyen, as well as former prime ministers. Tony Blair and John Major said on Sunday Britain must drop the “shocking” plan to pass legislation breaking its divorce treaty with the EU, in a breach of international law.

    The USD/JPY pair inched down 0.04% to 106.09 ahead of the ruling Liberal Democratic Party’s vote for a new leader, due to take place later in the day. Chief Cabinet Secretary Yoshihide Suga is predicted to win in a landslide victory, with the successor to Abe expected to be appointed on Wednesday.

    Investors expect a few radical changes, with Suga widely expected to continue Abe’s current policies if appointed.

    “The focus is on the line-up of his cabinet as well as whether he will call a snap election,” MUFG Bank Chief FX strategist Minori Uchida told Reuters.

    But he added, “He is saying he will continue and advance Abenomics but it is questionable how much advancement he can make.”

    TECHNICAL OUTLOOK 

    On the daily charts of USD/JPY, the price opened at 106.09 on Monday morning session in Asia. The overall outlook of the pair is inside the resistance of 112 and support at 105.  

    Due to the upcoming events in appointment of Yoshihide Suga in Japan, the Japanese yen strengthens against the US Dollar. The dollar seems to weaken this week unlike last week where the dollar gains against other baskets of currencies despite holidays and other events. 

    The current price is now threading lower near support at 105. Traders around the globe might looking for buying positions when the price hits this support but extreme caution should be taken as spikes from upcoming news will affect volatility. 

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