Forex: The pound bounced on hopes of a delay to the Brexit, the declining Dollar

The pound sterling rose on Wednesday, boosted by hopes of a postponement of the Brexit, while the u.s. dollar fell, the weakness of the u.s. manufacturing sector, supporting bets on an easing in more aggressive federal Reserve policy.

The pound rose 0.7% to 1,2173 around 11: 30, on the optimistic about the possibility of avoiding “Brexit” without an agreement.

The gains were obtained after legislators in the uk have voted to take control of the parliamentary agenda on Wednesday in order to pass a law to prevent “Brexit” without an agreement. If the attempt were to succeed, the Prime minister Boris Johnson would be forced to ask for more time to the European Union and to prevent that it does not leave the block without any agreement.

The pound had fallen below 1.20 and has reached its lowest level since the flash crash of October 2016 on Tuesday.

Johnson said it would now push for early elections, adding another major source of political uncertainty for the pound sterling.

“We still can’t say what will be the outcome of the game,” said Yukio Ishizuki, strategist principal at Daiwa Securities.

“The Brexiteers pure and hard want a “Brexit” anyway so that the Remainers are fiercely opposed. This is not an issue on which both parties can join mid-way for a compromise.”

Against a basket of currencies, the dollar index was down slightly to 98,84, after being removed from the two-year peak reached on Tuesday.

A report closely followed by the Institute for Supply Management (ISM) on Tuesday showed that manufacturing activity in the world’s largest economy had contracted for the first time in three years last month.

“The hope of seeing the Fed coming to the rescue has increased,” said Rodrigo Catril, a strategist senior fx at National Australia Bank in Sydney.

“But this is not a capitulation on the dollar. This is just to stop the recent rise in the dollar”.

The dollar was higher than the yen, gaining 0.27% to 106.20.

There was little sign of a breakthrough in trade negotiations after u.s. president Donald Trump has spoken on Twitter (NYSE:TWTR) to announce to him that he would be “more hard” with Beijing during a second term if the trade negotiations are lingering.

The rate of the euro has increased slightly to 1,1013, a rise from its low of 28 months against the dollar that it hit on Tuesday, as investors anticipated higher interest rates, negative in the euro area.

–Reuters contributed to this report

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