BCN-17,18 British pound wobbles before crunch Brexit vote

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EUROPE-MARKETS

British pound wobbles before crunch Brexit vote

LONDON, Jan 16, 2019 (BSS/AFP) – Sterling was under increasing pressure
Tuesday as British Prime Minister Theresa May faced the prospect of a
humiliating parliamentary defeat for her hard-fought Brexit deal.

The pound drooped against the dollar and also lost ground against the euro
with investors on tenterhooks before the vital vote.

“The degree of political uncertainty in the UK means that economic news has
been almost totally usurped,” Rabobank analyst Jane Foley told AFP.

European stock markets meanwhile enjoyed cautious gains after Asia swung
higher as worries dimmed over a global economic slowdown and Wall Street
posted modest gains in the late New York morning.

The London FTSE-100 stock index even outperformed its eurozone peers, as
equity investors welcomed a weaker pound.

With a little over two months to go until Britain leaves the European Union
on March 29, lawmakers are almost certain to vote against May’s deal — which
was agreed with Brussels in a fraught and long-running process after the June
2016 referendum to leave the bloc.

The outcome of Tuesday’s Brexit vote — which May delayed in December over
fears of an embarrassing defeat — the result of which is expected around
2015 GMT.

– ‘Fireworks’ –

Market pundits do not expect a “significant” swing following the outcome —
but they do anticipate “fireworks” as the nature of Brexit becomes apparent
in the coming days, weeks and months.

“Today’s vote is a foregone conclusion so sterling is unlikely to move
significantly,” added Interactive Investor analyst Rebecca O’Keeffe.

“However, the range of possible outcomes after today’s vote is what is far
more interesting,” she told AFP.

“From no Brexit, which could see sterling move to $1.40-plus, versus a hard
Brexit which could see a move towards parity.

“The fireworks will happen after today — when it is clear what happens
next.”

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May’s last-minute appeals to MPs appear to have fallen on deaf ears and how
much she loses by could determine whether she tries again, loses office,
delays Brexit — or if Britain even leaves the EU at all.

Hardline Brexiteers and Remainers oppose the agreement for different
reasons and many fear it could lock Britain into an unfavourable trading
relationship with the EU.

While the plan is expected to be rejected, experts say the margin of loss
will be key. A massive defeat for the government would mean May’s deal is
dead in the water.

Above all, markets remain fearful of a chaotic departure from the bloc.

– More uncertainty –

“There may be many possible political outcomes with respect to Brexit —
but for sterling the outlook boils down to whether or not there will be a
hard Brexit,” added Foley.

“The pound is well off its recent lows on the perception that there is
little appetite cross party for a hard Brexit — though it is still a
possibility.

“It seems likely that tonight’s vote will be followed by another ballot of
some description albeit a second Commons vote, referendum or general
election.

“This means more uncertainty and potential volatility for the pound.”

Elsewhere on Tuesday, Asian equity markets rebounded from the previous
day’s sharp losses, with Hong Kong and Shanghai lifted by Chinese plans to
slash taxes to boost the economy.

China’s disappointing trade data on Monday sent shivers through trading
floors as it showed the long-running US tariffs row is beginning to bite.

But dealers resumed last week’s rally that was fuelled by optimism that
Beijing and Washington will eventually resolve their differences — and that
the US Federal Reserve will pause in raising interest rates.

BSS/AFP/HR/1004