Sterling gripped by Brexit crisis
The British pound struggled to stay afloat in Asian trade on Friday having suffered a tumultuous slide overnight, as investors feared political turmoil in the country could see it crash out of the European Union without a divorce deal.
Both the dollar and the yen benefited from a deepening crisis for UK Prime Minister Theresa May after the resignation of key ministers from her government imperilled her Brexit plan.
That left the sterling vulnerable to further losses. It was changing hands at $1.2792, barely holding steady after declining 1.7 percent on Thursday, its steepest percentage slide since Oct. 11 2016.
“Political troubles are never good for the currency but in the case of the UK, the pound could drop to 1.25 versus the dollar on the prospect of a no deal Brexit, leadership challenge and slower growth,” Kathy Lien, managing director of currency strategy at BK Asset Management said in a note.
The resignations, including that of Brexit minister Dominic Raab, came hours after May had claimed backing for a draft divorce deal. The hostility from government and opposition lawmakers raised the risk that the deal would be rejected in parliament, and that Britain could leave the EU on March 29 without a safety net..
May’s compromise plan, which seeks to maintain close trade ties with the EU in the future, is facing opposition from Brexiteers, pro-Europeans, the Northern Irish party that props up her government, and even some of her own ministers, thus raising the risks of her losing her job, of Britain leaving the bloc with no agreement or even another referendum.
Without a deal, the UK would move in March from seamless trade with the EU to customs arrangements set by the World Trade Organization for external states, which could cause panic in financial markets.
However, some analysts believe sterling bulls have a reason not to throw in their towel yet, noting there is a chance of another referendum with the choice between a hard Brexit and remaining in the EU.
A snap Sky News poll yesterday showed 55 percent in favour of another referendum, while 54 percent supported no Brexit, 32 percent a hard Brexit and only 14 percent May’s deal.
“A second referendum would likely result in clear vote to remain, a strongly positive outcome for GBP. With that in mind we think the upside tail has fattened more than the downside,” said Adam Cole, chief currency strategist at RBC in a note.
Draghi’s speech at Frankfurt European Banking Congress
The European Central Bank (ECB) President Draghi’s speech is likely to be the main event risk in a data-light European session ahead. Draghi is due to deliver the keynote speech at the Frankfurt European Banking Congress that is scheduled at 0830 GMT.
Draghi is likely to speak on the theme of “Back to Normal – What Does It Mean?” that includes topics such as:
- Moving towards tomorrow’s business models: fine-tuning or disruption?
- Technology in finance: ever broader, ever deeper?
- Macroeconomic Implications of a return to a “normal” monetary policy.
Markets will pay close attention to any fresh hints on the monetary policy or Eurozone economy. Although, no surprises are expected as the ECB remains on track to unwind its massive asset purchases programme (QE) in December. However, Draghi may sound cautious on the Eurozone growth outlook, as the European political risk remains in focus.
At its Oct 25th monetary policy meeting, Draghi noted: “If the lack of solutions in the negotiations around Brexit continues and remains as the end date gets closer, the private sector itself will have to prepare for a hard Brexit… I would not call it a big financial stability risk, but financial uneasiness.”
How could it impact EUR/USD?
According to Omkar Godbole, Analyst at FXStreet, “The EUR/USD is attempting a break above the upper edge of the falling wedge at a time when the treasury yields are looking toppy. The wedge breakout, if confirmed, would confirm a bearish-to-bullish trend change. The pair is chipping away the wedge hurdle of 1.1338. A daily close above that level would confirm a breakout – the sell-off from the September high of 1.1815 has ended and the bulls have regained control. The move, if backed by a double bottom bearish reversal in the US 10-year treasury yield, could yield a stronger rally toward 1.1586 (61.8% Fib R of Sept/Nov drop).”
About Draghi’s speech
As part of his job in the Governing Council, he gives press conferences in the back of how the ECB observes the current European economy. President’s comments may determine positive or negative the Euro’s trend in the short-term. Usually, if he shows a hawkish outlook, that is seen as positive (or bullish) for the EUR, while a dovish is seen as negative (or bearish).
Stock Market News
Facebook’s Sandberg denies report that she ignored Russian activity on site and thwarted investigations
Facebook Chief Operating Officer Sheryl Sandberg on Thursday night responded to a New York Times report that described how the company ignored and then tried to conceal Russia’s use of the social network to disrupt the 2016 U.S. election.
In a Facebook post, Sandberg acknowledged that she and founder Mark Zuckerberg were “too slow” to respond to the Russian interference on the site.
“But to suggest that we weren’t interested in knowing the truth, or we wanted to hide what we knew, or that we tried to prevent investigations, is simply untrue,” she said.
“The allegations saying I personally stood in the way are also just plain wrong. This was an investigation of a foreign actor trying to interfere in our election. Nothing could be more important to me or to Facebook,” Sandberg added.
Her remarks came after an extensively reported New York Times article on Wednesday that described how Zuckerberg and Sandberg downplayed internal efforts to assess the Russian misinformation campaigns, and then tried to deflect public scrutiny onto Facebook’s competitors instead.
Facebook executives, including former Chief Security Officer Alex Stamos, countered some of the claims made in the Times’ report. The tech company’s board called the claims that Zuckerberg and Sandberg knew about the Russian interference and tried to ignore it or prevent investigations “grossly unfair.”
China’s Kindergarten Crackdown Is the Latest Disaster for Stocks
First came the clampdown on shadow banks. Then it was gaming companies and drugmakers. Now education firms are in the Chinese government’s crosshairs, roiling stocks and reminding investors how quickly their fortunes can change in a country rife with regulatory risk.
RYB Education Inc. and Bright Scholar Education Holdings Ltd. both plunged by records in U.S. trading, while Vtron Group Co. and China Maple Leaf Educational Systems Ltd. sank in Shenzhen and Hong Kong after the government unveiled new rules that prohibit companies from financing for-profit kindergartens via the equity market. The losses echoed declines in Chinese peer-to-peer lenders, gamemakers and pharmaceutical companies after regulators increased scrutiny of the industries this year.
While policy makers say the new rules will help protect consumers, they’ve taken many investors by surprise. That’s adding to jitters in a $5.8 trillion stock market already grappling with a trade war and the weakest economic expansion since 2009. China’s benchmark Shanghai Composite Index has tumbled nearly 20 percent this year, one of the steepest declines worldwide.
“The education sector had massive growth potential and was once red-hot among equity investors,” said Steven Leung, executive director at Uob Kay Hian (Hong Kong) Ltd. “It’s a pity that the government is stepping up regulation. What’s more annoying for a lot of sectors which rely heavily on the government is that you can’t expect a timeline, and many sudden changes in policies are a surprise.”
Bitcoin Scammer Hacks More High Profile Twitter Accounts
If there’s one thing that hackers can be accused of, it’s the ability to be highly inventive. Case in point is the recent Bitcoin scam carried out on Twitter. A fake account pretending to be Tesla CEO Elon Musk managed to rake in over $180,000 in ill-gotten profits. However, the scam went a bit further by the hackers taking over the accounts of some high profile entities.
Multiple Twitter Accounts Hacked
Last week, Live Bitcoin News reported of the latest Bitcoin scam to take place on Twitter. A fake Elon Musk account was used to lure the gullible in sending some BTC to a wallet in the promise of getting up to a 10x return.
The scam was further sweetened by the hackers taking control of some higher profile Twitter accounts. These accounts were used to bolster the false legitimacy of the fake Elon Musk giveaway.
These notable accounts included U.S. politicians (Representative Frank Pallone Jr. and California state senator Ben Allen), an Israeli politician (Rachel Azaria), the EU-based Pathe film production company, and the Capgemini consulting firm.
In now-deleted tweets, the hacked Ben Allen account said, “I sent 0.50 BTC and got back 5 Bitcoins!” Rachel Azaria’s hacked account tweeted, “+25 BTC, thank you!”
Other notable accounts hacked for the Twitter Bitcoin scam include the Indian national disaster management authority as well as the Indian consulate in Frankfurt, who tweeted, “I sent 0.50 BTC and got back 5 Bitcoins!”
Overall, it appears that the fake Elon Musk account made good on some minor transactions to make the entire enterprise seem on the up-and-up. The use of the other hacked accounts just lent some extra legitimacy to the scam.
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