Forex – Sterling near 6-Month Lows, Dollar Edges Higher

Investing.com – The pound was lower against the U.S. dollar on Tuesday, closing in on its weakest levels in six months amid persistent worries over Brexit, while rate cut expectations capped gains in the U.S. dollar

Sterling was down 0.39% at 1.2465 by 04:17 AM ET (08:17 GMT) following an overnight loss of 0.5%. A drop below the 1.2439 level would take the British pound to its lowest since early January.

The euro was a touch lower at 1.1242 after losing 0.1% on Monday amid expectations for a dovish European Central Bank meeting next week.

Sterling was under pressure as investors were nervous about the prospect of eurosceptic Boris Johnson winning the Conservative party leadership contest and becoming the next British prime minister as early as the end of this month.

Poor economic data and signals from the Bank of England that it could cut interest rates instead of raising them as previously expected have also hit the pound.

“The euro has been weighed by the long struggling pound, which in turn is likely to suffer from Brexit-related woes until the Conservative party leader is decided next week,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

The dollar pushed higher against the yen, but struggled to make significant headway, rising 0.1% to 108.06.

The U.S. currency rose to a six-week high of 108.99 yen last week but slid after Federal Reserve Chairman Jerome Powell set the stage for a rate cut later this month by giving a sombre outlook on the world’s largest economy.

The dollar lost further ground against the yen toward the end of last week after Chicago Fed President Charles Evans said on Friday that “a couple” of rate cuts were needed to boost inflation.

The U.S. dollar index versus a basket of six major currencies was up 0.18% to 96.72 after edging up 0.13% the previous day.

The Australian dollar edged down to 0.7023 after gaining about 0.3% the previous day, getting a lift from Chinese economic data which either matched or beat market forecasts. China is Australia’s largest trading partner.

–Reuters contributed to this report