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Pound rallies on Brexit delay hopes before ‘no deal’ vote
LONDON, March 14, 2019 (BSS/AFP) – The British pound recovered strongly
Wednesday as traders were willing to bet that the UK’s EU exit will be pushed
beyond its March 29 deadline.
Sterling’s rebound came hours ahead of a vote in Britain’s parliament
which is expected to soundly reject a “no deal” Brexit.
If so, a further vote will determine whether London should ask the EU for
more time beyond March 29 to sort out its departure from the bloc.
“The potential delay of Brexit is what is helping to hold up the pound,
but by the same token, the uncertainty is limiting its upside potential,”
said Fawad Razaqzada at Forex.com.
“If it feels like the UK government is going around in circles, it is
because it is,” he added.
– ‘Sniffing opportunity’ –
Sterling, and also London’s stock market, had taken a brief knock after
MPs on Tuesday rejected for a second time a Brexit withdrawal deal negotiated
by Prime Minister Theresa May, despite her obtaining last-minute added
reassurances from EU officials.
But both recovered as the European trading day wore on, with the pound up
more than one percent against the dollar on the day, and its progression
against the euro only marginally less vigorous at 0.9 percent.
“The pound has been the main area of volatility when reflecting Brexit
developments, with the FTSE 100 remaining somewhat stable despite the
constant shifts,” said Joshua Mahony, senior market analyst at IG trading
group.
Sparking the pound’s rally, meanwhile, was “markets either sniffing an
opportunity for a second referendum or a deal passing,” said Viraj Patel, a
foreign currency and macroeconomics strategist at Arkera, in a tweet.
– Not a care –
Both the pound and the FTSE held up even as Britain’s finance minister
Philip Hammond slashed the forecast for economic growth this year due to
Brexit uncertainty.
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The UK economy is forecast to grow by 1.2 percent this year, down on the
government’s prediction of 1.6 percent in October, Hammond said as he gave a
budget update.
Elsewhere Wednesday, Asian indices closed lower.
Eurozone stock markets ended the day higher across the board, and Wall
Street also showed solid gains in the early New York afternoon, prompting
Briefing.com analyst Patrick O’Hare to note that the US stock market was
acting like it did not have a care in the world.
“It could care less that the UK’s Brexit effort is a mess. It could care
less that Boeing is dealing with a PR nightmare as multiple countries have
grounded the 737 MAX,” he said, adding investors also appeared unfazed by
declining earnings estimates and global growth slowing down.
O’Hare said investors appeared to be happy that Fed interest rates
probably will not rise any time soon, a supportive factor for stocks.
Oil was also well-bid, with the US benchmark WTI contract reaching a
multi-month high driven by falling American stocks and global supply
uncertainty.
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