Published: Fri, April 21, 2017
Economy | By Annette Adams

Dollar bounces off lows; sterling pulls back from six-month high

Dollar bounces off lows; sterling pulls back from six-month high

May said that she has called for an general election to ensure that Britain has the "certainty, stability and strong leadership" required to negotiate the UK's split from the European Union as she accused Labour, the Lib Dems and the SNP of all seeking to frustrate the Brexit process.

U.S. Treasury yields fell as nervousness ahead of France's first round of Presidential elections this weekend and ongoing geopolitical tensions increased demand for safe-haven U.S. debt.

Since prime minister Theresa May's shock announcement on Tuesday she would seek a snap general election, the index has fallen 3%.

"We expect that the PM's gamble is likely to buy her more time as well as room for maneuver in the Brexit negotiations as she will depend less on fringe groups in her own party", chief global political strategist Tina Fordham said.

However, the Nikkei 225 remained positive, but Shanghai continued to drop by 1 percent.

"That may reduce the risk of a negotiation failure and thus "chaotic Brexit", but also of the United Kingdom remaining in the Single Market in the long-term or even reversing the decision to leave the European Union".

The FTSE 100 fell 0.1 percent to 7,142.30 while France's CAC 40 rose 0.2 percent to 4,999.18 and Germany's DAX gained 0.2 percent to 12,025.24.

The pound was lording it at $1.2824 on Wednesday having shattered a month-old trading range with a jump of 2.2 per cent overnight. It also cleared the 200-day moving average for the first time since June, putting the squeeze on a raft of speculative short positions. The euro stood at a three-week high of $1.0736.

The Dollar is also under some pressure as investors consider whether or not the Federal Reserve is able to push through more interest rate increases over the course of the year, given the recent unexpected string of softer than anticipated economic data. USA homebuilding fell in March, and manufacturing output dropped for the first time in seven months. Yields on 10-year Treasury paper sank to 2.17 percent, a world away from the 2.629 peak seen in March. Wall Street looked set for gains, with Dow futures up 0.1 percent and S&P futures gaining 0.3 percent.

The dollar index, which measures the greenback against a basket of six other major currencies, hit a three-week low on Tuesday as 10-year treasury yields fell below 2.2% to their weakest levels since the USA election results, and remained close to that level on Wednesday.

Earlier, the pan-European FTSEurofirst 300 index lost 1.21 percent and MSCI's gauge of stocks across the globe shed 0.40 percent.

Oil prices were weighed by concerns that USA production growth is undermining efforts to cut oversupply after a US government report said shale oil output in May was expected to post the biggest monthly increase in more than two years.

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