BFF-06 Pound shrugs off Johnson’s latest Brexit setback

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BFF-06

BRITAIN-FOREX-POUND-BREXIT

Pound shrugs off Johnson’s latest Brexit setback

TOKYO, Oct 21, 2019 (BSS/AFP) – Sterling fell modestly as trading resumed
Monday following British Prime Minister Boris Johnson’s latest failure to
break the Brexit deadlock, with forex markets shrugging off a weekend of
drama in the British parliament.

The currency was down 0.55 percent to US$1.2913 at around 0000GMT, holding
relatively steady for a currency that has been on a rollercoaster over the
past month.

“The fact Sterling has proven surprisingly resilient… buttresses well
for risk sentiment,” wrote Stephen Innes, Asia Pacific market strategist at
AxiTrader, in a commentary.

All eyes were on the pound after the House of Commons sat on Saturday to
consider Johnson’s EU divorce deal in a vote that was seen as a potential
turning point in the long-running Brexit saga.

Instead of delivering a verdict on the deal itself, lawmakers voted to
force Johnson to ask the European Union for another Brexit delay, hoping to
prevent the country crashing out of the bloc on October 31 with no agreement
in place.

Johnson reluctantly agreed, although the EU is yet to respond to the
request and Britain’s conservative government insists it is still committed
to exiting by month’s end.

– ‘Details are what matter’ –

It meant that instead of decisive developments over the weekend, the
market was still waiting to see how the situation would play out, Shinichiro
Kadota, exchange strategist at Barclays Securities in Japan told AFP.

“There had been hopes late last week that this issue would finally see a
settlement. But now it’s been shelved,” he said.

“The pound rallied to close to $1.30 from $1.22… We can say it is
holding firm, which shows hopes (for avoiding no-deal Brexit) have not been
dashed.”

Rodrigo Catril, a senior forex strategist at National Australia Bank said
the market was not in “wait-and-see mode.”

“We saw the pound lose a little bit of ground, but from the perspective of
what it’s gained over the past week, that’s really minimal,” he told AFP.

Catril said it appeared a deal would be done before October 31 but a great
deal of uncertainty remained, including the possibility of a “confirmatory
vote”, or second Brexit referendum.

“Based on commentary overnight, there seems to be a fair bit of support
rising for Boris Johnson to get the deal done, but details are what matter,”
he said.

“There’s still the potential for a confirmatory vote and the potential for
further amendments.”

He said sterling had the potential to rise if Foreign Secretary Dominic
Raab’s claim that the UK government had the numbers to push through Johnson’s
deal proved correct.

“But we’re not yet certain that the government has got the vote, so that
points to a little bit of cautiousness in terms of the pound facing a little
bit of uncertainty in coming days,” Catril said.

BSS/AFP/MSY/0825 hrs