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EUROPE-MARKETS
Brexit tension sends pound tumbling
LONDON, March 13, 2019 (BSS/AFP) – The pound tumbled Tuesday after the UK
government’s top legal advisor cast doubt on Prime Minister Theresa May’s
last-gasp changes to her Brexit deal hours before a vital vote that few think
May can win.
Sterling, which had been rising after May secured revisions to the Brexit
withdrawal agreement, hit reverse after legal advice from Attorney General
Geoffrey Cox.
“It looks like any hopes of an unlikely victory for the PM’s deal later
have just been extinguished,” said XTB analyst David Cheetham.
Cox said last-minute new agreements “reduce the risk” of Britain being
“indefinitely and involuntarily” held in the so-called Irish border backstop.
However, he also warned that “the legal risk remains unchanged” that
Britain would have no legal means of ending the controversial backstop
without the European Union’s agreement.
In reaction, the pound slid to as low as $1.3005 from $1.3143 just before
Cox published his advice. The euro jumped to 86.55 pence from 85.75 pence.
Overnight, following news of May’s hard-won EU concessions, sterling had
struck a three-week peak at $1.3289 and to 84.76 pence per euro — a level
last seen in May 2017.
– Nose dive –
“Sterling took a nose dive on the back of the Cox statement,” said
ThinkMarkets analyst Naeem Aslam.
“It was his opinion which matters the most; now that he has made it clear
that the recent deal has no weight, the door is wide open for sterling to
move lower.”
Rabobank analyst Jane Foley said the despite the volatility, the pound
remains the best performing G10 currency so far this year.
“Even if May’s deal is not passed today, the market consensus remains of
the view that a hard Brexit will be avoided and this view continues to
provide underlying support for the pound.”
If the deal is voted down, MPs will Wednesday vote on whether Britain
should simply leave on March 29 without any deal at all.
London’s stock market, meanwhile, did well on Tuesday, as is often the
case when sterling is weak.
Frankfurt closed lower and Paris slightly up.
On Wall Street the DJIA index was lower in the early New York afternoon,
but the S&P 500 and Nasdaq both rose.
Boeing shares lost more than six percent on the second day of a rout for
the airline’s stock as several governments closed their countries’ airspace
to 737 MAX planes and airlines grounded the aircraft following a crash in
Ethiopia.
BSS/AFP/HR/1035