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Pound Weaker On Brexit Deadlock

The pound drifted lower against its major counterparts in the European session on Tuesday, as Brexit stalemate persisted after U.K. Prime Minister Boris Johnson refused to seek an extension to Brexit even as a legislation for the Brexit delay came into effect on Monday.

The PM told the House of Commons overnight that he would not ask for another Brexit delay, disregarding the law that he must ask for an extension if he cannot achieve a deal by October 31.

U.K. lawmakers again rejected Johnson's request to hold a snap general election. British Parliament was suspended until October 14, failing to have a path forward for Brexit.

Data from the Office for National Statistics showed that the UK unemployment rate remained at the lowest since late 1974.

In three months to July, the ILO jobless rate remained unchanged on quarter, at 3.8 percent, but slightly below the expected 3.9 percent.

The employment rate came in at 76.1 percent in three months to July, the joint-highest on record.

European stocks fell after a data showed that China's factory-gate prices shrank at their fastest pace in three years in August, falling deeper into deflationary territory amid flagging demand at home and abroad.

The producer price index fell an annual 0.8 percent in August, suggesting that further monetary easing is on the horizon. China's consumer price index rose 2.8 percent from a year earlier, unchanged from that in July.

The pound was trading mixed against its major counterparts in the Asian session. While it rose against the yen and the franc, it held steady against the euro and the greenback.

The pound pared gains to 1.2307 against the greenback, from a high of 1.2379 hit at 2:30 am ET. The pound is seen finding support around the 1.20 level.

After rising to a 1-1/2-month high of 132.89 versus the yen at 2:30 am ET, the pound edged down to 132.02. The pound may possibly face support around the 130.00 level.

Data from the Bank of Japan showed that Japan M2 money stock rose 2.4 percent on year in August, coming in at 1,029.7 trillion yen.

That was up from the downwardly revised 2.3 percent in July.

The pound declined to 1.2196 against the franc, after rising to 1.2281 at 2:30 am ET. Next key support for the pound is seen around the 1.20 level.

Reversing from a high of 0.8925 seen at 2:30 am ET, the pound dropped to 0.8974 against the euro. If the pound falls further, 0.92 is seen as its next support level.

Looking ahead, at 8:15 am ET, Canada housing starts for August are scheduled for release.

Canada building permits for July will be published in the New York session.

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