Sterling jumps after embattled PM May's win on 'no confidence' vote

Market Review - 12/12/2018  23:34GMT  

Sterling jumps after embattled PM May's win on 'no confidence' vote

The greenback erased initial gains made in Asian and European morning and ended broadly lower against majority of its peers on Wednesday on recovery in global stock equities as well as intra-day rally in sterling after expected victory by embattled U.K. PM Theresa May in a 'no confidence' vote. Euro also rebounded after a report that Italy is to propose a budget deficit target of 2 percent which is well below the previous target of 2.4 percent.  
  
Versus the Japanese yen, although dollar extended its recent gains to 113.52 at Asian open on easing U.S.-China trade tension, price met reterated on profit taking and later dropped to session lows at 113.15 in New York after the Dow opened higher together with broad-based usd's weakness but later pared intra-day gain.  
  
Although the single currency moved sideways in Asia after Tuesday's selloff, renewed buying emerged at 1.1315 at European open after Italian Deputy PM Salvini denied early report that his ruling League party was tempted by early elections in March and rallied in tandem with sterling to session highs at 1.1379 in New York following the Italy's budget news, price later hit session highs of 1.1388 before easing.   
  
Reuters reported Italy hopes it can reach a deal with the European Commission over its disputed 2019 budget by agreeing to a deficit of between 2.0-2.2 percent of gross domestic product, cabinet undersecretary Giancarlo Giorgetti said on Wednesday.  
  
The British pound went through a highly volatile session. Although cable recovered to 1.2515 in Asia, price fell briefly hit a fresh 20-month low at 1.2477 at European open on news that leadership contest in UK PM May had been triggered. However, price swiftly erased its losses as market had priced in a victory by PM May. Price rose to 1.2552 on cross-buying in sterling, especially versus euro then jumped to 1.2606 ahead of New York open after media source reported 153 Tory lawmakers are said to be publicly backing May ahead of confidence vote then later rallied to 1.2671 as more Conservative lawmakers showed support for May before retreating . Later, cable climbed to 1.2672 after PM May won the vote but quickly fell to 1.2594 on profit taking.  
  
Reuters reported Prime Minister Theresa May survived a confidence vote from her Conservative party on Wednesday, but more than a third of her lawmakers said she was no longer the right leader to implement Britain's exit from the European Union.  
  
On the data front, the U.S. Labor Department said on Wednesday its consumer price index (CPI) was unchanged from a month earlier, slowing from the 0.3% increase seen in November. In the 12 months through November, inflation rose 2.2%, in line with expectations and down from 2.5% in October.  
  
Core CPI, a key gauge of underlying consumer price pressures that excludes food and energy costs, increased by 0.2% from a month earlier, matching consensus and the prior increase. The annual increase in the core CPI was 2.2%, also in line with analysts' estimates.  
  
Data to be released on Thursday :    
New Zealand food price index, UK RICS housing price balance, Germany CPI, HICP, France CPI, Swiss producer/import price, SNB interest rate decision, EU ECB interest rate decision, ECB deposit rate decision, EU summit on budget and Brexit, U.S. import prices, export prices, initial jobless claims, and Canada new housing price index.