Pound Falls On Brexit Worries, Risk Aversion

00:56, 26th September 2016

(RTTNews) - The pound declined against its major counterparts in early European deals on Monday, amid lingering worries about the consequences of Brexit, after U.K. Foreign Secretary Boris Johnson insisted for withdrawal from the European Union in early 2017.

Speaking with Sky News late last week, Johnson suggested that UK could trigger Article 50 by early May 2017 and that he expects the negotiations over terms of departure to complete within May 2019.

Further weighing on the currency was risk aversion, as traders remained cautious ahead of tonight's first U.S. presidential debate and an informal OPEC meeting in Algiers that starts today.

A Washington Post-ABC News poll has Democratic presidential nominee Hillary leading Republican candidate Trump by 2 points on the eve of the debate.

In economic front, survey by the Confederation of British Industry and PricewaterhouseCoopers showed that sentiment in the British financial services sector weakened for the third straight time in the three months to September.

A balance of -13 percent said they were less optimistic about their overall business situation compared to -13 percent in the prior quarter. This was the third consecutive fall, the longest period of decline in sentiment since 2009.

The currency held steady against its key counterparts in the Asian session.

The pound declined to near 6-week lows of 0.8699 against the euro and 129.89 against the yen, from its previous highs of 0.8647 and 131.23,respectively. The next possible support levels for the pound may be located around 0.88 against the euro and 128.00 against the yen.

The pound dropped to 1.2507 against the Swiss franc, its weakest since August 19. Continuation of the pound's downtrend may see it challenging support around the 1.22 region.

The pound, having advanced to 1.2987 against the dollar at 10:00 pm ET, reversed direction and fell to 1.2916. On the downside, 1.28 is likely seen as the next support level for the pound.

Looking ahead, U.S. new home sales data for August is slated for release in the New York session.

At 8:30 am ET, European Central Bank's member of the supervisory board, Ignazio Angeloni, speaks at a conference "Strengths and Weaknesses of European Banking" organized by Brevan Howard Centre and Imperial College Business School, in London.

At 9:00 am ET, European Central Bank President Mario Draghi will testify before the Committee on Economic and Monetary Affairs of European Parliament, in Brussels.

At 9:30 am ET, Minneapolis Fed President Neel Kashkari participates in a fireside chat moderated by Harry Melander, president of the Minnesota Building and Construction Trades Council and board member of the Federal Reserve Bank of Minneapolis, in Minneapolis, U.S.

Fifteen minutes later, European Central Bank Vice President Vitor Constancio is expected to speak at a conference, in Frankfurt.

At 11:45 am ET, Federal Reserve Governor Daniel Tarullo will deliver a speech titled "Next Steps in the Evolution of Stress Testing" at the Yale School of Management Leaders Forum, in New Haven.

At 12:00 pm ET, Austrian National Bank Governor and ECB Governing Council member Ewald Nowotny is expected to speak on the future of banks, in Vienna.

At 1:30 pm ET, Federal Reserve Bank of Dallas President Robert Kaplan will participate in moderated Q&A before the Independent Bankers Association of Texas Annual Convention in Dan Antonio.