Forex – British Pound Little Changed as May Wins Confidence Vote
The British pound was little changed on Thursday in Asia after UK Prime Minister Theresa May’s government survived a vote of no-confidence. The news followed the hefty defeat of the prime minister’s withdrawal deal in the U.K. parliament on Wednesday.
The GBP/USD pair last traded at 1.2867, down 0.08% by 11:51 PM ET (04:51 GMT).May now has until next week to table an outline for a plan “B.” The market now believes there may an extension of the Article 50 exit date past the original March 29 deadline.
“We must find solutions that are negotiable and command sufficient support in this House,” May said. “It’s unlikely there will be big changes to May’s plan, so parliament is likely to oppose it as well,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities, in a Reuters report. Meanwhile, the USD/CNY pair gained 0.2% to 6.7660 as the People’s Bank of China (PBOC) set the yuan reference rate at 6.7592 vs the previous day’s fix of 6.7615.
On Wednesday, the People’s Bank of China injected CNY 560 billion into the country’s banking system. The U.S. dollar index that tracks the greenback against a basket of other currencies gained 0.2% at 95.838.
The AUD/USD pair was down 0.2% at 0.7150 and traded near a one-week low.
Elsewhere, the USD/JPY pair trade near flat at 109.00.
Bank of Japan Governor Haruhiko Kuroda warned on Thursday the ageing societies could lead to falling fund demand, which would keep interest rates lower and in turn making the job of the central bank more difficult. “As a low interest rate environment persists and credit demands become stagnant amid a declining population, banks might accelerate their search-for-yield activities such as expanding their exposure to overseas assets and increasing loans and investments to firms with higher credit risks,” he said.
“If that were the case, the entire financial system could become less stable,” Kuroda said in a seminar that Japan hosted as chair of this year’s G20 meetings.