Investing.com -- The euro and pound
were little changed against each other and higher against the dollar in early
trading in Europe Thursday after the European Union agreed to push back the
U.K.’s departure date as far as Oct. 31.
The decision essentially leaves the
pound in limbo, with the possibility of a no-deal Brexit still very much alive,
and the prospect of a chaotic campaign for European elections to come. As such,
it’s unlikely to end the uncertainty that has depressed both business and
consumer sentiment in recent weeks. The U.K. will be forced out of the EU on
June 1st if it fails to take part in those elections.
At 04:10 AM ET (0810 GMT), the euro
was at $1.1287, up 0.2% from late Wednesday in Europe, while the pound was at
$1.3096, virtually unchanged.
It’s “the worst of all worlds,” said
Helen Thomas, CEO and founder of the consultancy Blonde Money. She said it
“removes the time pressure to force a decision but doesn’t quite provide enough
time for air to clear through a general election or a second referendum.”
“This is not positive for the U.K.
economy, or for U.K. assets in the long run,” Thomas added.
One of the reasons the dollar hasn’t
gained against either sterling or the euro is the first explicit admission from
the Federal Reserve that the next move in U.S. interest rates may be down
rather than up. The minutes of the Fed’s last policy meeting, released
Wednesday, said various Fed officials thought that the appropriate level for
rates could “shift in either direction”.
But
the euro too is under the influence of dovish central bank comments. European
Central Bank President Mario Draghi again stressed at his regular press
conference that the ECB would do everything it can to get inflation back up to
its target level, and didn’t steer against the perception that recent talk of
‘tiering’ the penalty rate on excess deposits at the ECB is a preliminary step
to cutting rates later this year.
The dollar index, which measures the
greenback against a basket of six major currencies, hit its lowest level in two
weeks after the release, but recovered slightly to trade at 96.530 as of 04:10
AM ET.
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