Currencies: Dollar bounces at start of headline-heavy week featuring Brexit, G-20

Currency traders are preparing for a headline-heavy week, as U.K. Prime Minister Theresa May attempts to line up parliamentary support for a Brexit agreement with the European Union and Italy’s politicians might be open to reconsider their budget proposal.

The ICE U.S. Dollar Index

DXY, +0.11%

 was modestly stronger on Monday, spending much of the session in a tight range around Friday’s closing level, last up 0.1% at 97.050.

Besides data from economic power houses like Japan and Germany, the week will culminate in the Group of 20 summit in Buenos Aires, at which President Donald Trump is slated to meet China’s President Xi Jinping and talk trade.

Read: What the G-20 summit means for currencies

The drop in oil prices will also likely feature on the G-20 agenda, market participants said, after last week’s decline dragged down the currencies of oil-exporting nations, including Norway’s krone

USDNOK, -0.1780%

 and Canada’s dollar

USDCAD, +0.1587%

In emerging markets, Russia’s ruble

USDRUB, +1.3925%

 and Colombia’s peso

USDCOP, +0.53%

 were hit.

With risk appetite recovering from last week when equities were under pressure, Japan’s yen

USDJPY, +0.59%

 , a haven currency, softened to its weakest since the middle of the month. One dollar last bought ¥113.61, up 0.6%.

Don’t miss: The stock market needs to tank for the yen to reaffirm its haven status, strategist says

Following clashes between U.S. border guards and Latin American migrants at the Mexican border, Trump tweeted that Mexico should move the migrants back to their countries, leading the dollar to strengthen against the Mexican peso

USDMXN, +1.0077%

 to 20.6335 pesos per dollar at the peak, a more than five-month high. Mexican President-elect Andrés Manuel López Obrador is due to take office on Saturday.

Over the weekend, May and European Union leaders agreed on a deal outlining their future relationship after Britain exits the union in March 2019. This leaves the embattled May with the tricky task to win parliamentary approval of the plan. Though the leadership challenge that was rumored earlier this month never came to fruition, it is testament to just how unpopular May and her Brexit plan are in her own ranks and beyond.

Don’t miss: Why investors are cheering Italy, Brexit headlines for a change — though it might not last

The British pound

GBPUSD, +0.1485%

 retraced some modest strength from earlier in the session and was last little changed versus Friday at $1.2815.

Back in Brussels, the focus returned to Italy, after Rome’s coalition government signaled it was willing to concede some ground on its contentious 2019 budget proposal. The European Commission, concerned about the budget deficit of the eurozone’s third largest economy, rejected Italy’s proposal twice and began an excessive deficit procedure that could lead to sanctions.

Market participants attributed Italy’s willingness to come to the negotiating table to widening Italian bond spreads that could pose a risk to its frail banking sector.

The euro

EURUSD, -0.0353%

lost some strength as the European session drew to a close and the dollar bounced into positive territory. It last bought $1.1331, down from $1.1339 late Friday in New York.

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Anneken Tappe is a markets reporter for MarketWatch. She is based in New York.

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