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British pound rallies as ‘hard’ Brexit risk seen receding
NEW YORK, Feb 27, 2019 (BSS/AFP) – The British pound rallied Tuesday as
the odds of a “hard” no-deal Brexit receded, while US stocks edged lower
following dovish commentary from Federal Reserve Chair Jerome Powell.
British Prime Minister Theresa May promised to allow parliament to delay
Brexit by up to three months if her own divorce proposals fail to win the
support of lawmakers by March 12.
The dramatic reversal in May’s steadfast strategy came after threats of
mass resignations from her own ministers and calls for a second referendum on
Britain’s EU membership from the main opposition Labor Party.
But the change in course angered Brexit hardliners in May’s own
Conservative Party. Influential MP Jacob Rees-Mogg warned that “any delay to
Brexit is a plot to stop Brexit”.
The pound gained 1.2 percent against the dollar and also advanced against
the euro as investors bet the country would avoid a “hard” Brexit that
economists fear could crash the economy.
“Sterling was home to all the action as the UK currency soared to four-
month highs,” said a note from Western Union Business Solutions analyst Joe
Manimbo.
“While Britain’s road out of the EU remains winding and uncertain, the
pound shot higher as fears of a no deal exit abated.”
But the strength of sterling weighed on London equities, which finished
lower on a day when both Paris and Frankfurt advanced.
Earlier, Asian markets retreated amid doubts over whether Beijing and
Washington can resolve their bitter trade war.
US stocks finished a choppy session slightly lower after Powell reiterated
a cautious approach to further interest rate hikes.
– Dovish Fed –
Powell avoided any major surprises in his first of two days of
congressional testimony, telling the Senate Banking Committee that inflation
would fall further below the Fed’s two percent target in spite of solid
growth and job gains and that the central bank would be “patient” before
adjusting interest rates.
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“The market heard what it wanted to hear,” said Nate Thooft, a senior
portfolio manager at Manulife Asset Management. “He remains dovish and data-
dependent.”
Consumer confidence rebounded strongly in February as shoppers put the
Wall Street rout and extended government shutdown of recent months behind
them, according a Conference Board survey.
After a nearly 20 percent jump in US stocks since late December, some
analysts think the market will find it hard to rise much further absent a
positive catalyst, such as a final trade deal between the US and China.
Negotiators from Beijing and Washington have reported progress on the
talks and the next round of tariffs has been delayed but there is still no
final deal.
– Key figures around 2200 GMT –
New York – Dow: DOWN 0.1 percent at 26,057.98 (close)
New York – S&P 500: DOWN 0.1 percent at 2,793.90 (close)
New York – Nasdaq: DOWN 0.1 percent at 7,549.30 (close)
London – FTSE 100: DOWN 0.5 percent at 7,151.12 (close)
Frankfurt – DAX 30: UP 0.3 percent at 11,540.79 (close)
Paris – CAC 40: UP 0.1 percent at 5,238.72 (close)
EURO STOXX 50: UP 0.3 percent at 3,289.32 (close)
Tokyo – Nikkei 225: DOWN 0.4 percent at 21,449.39 (close)
Shanghai – Composite: DOWN 0.7 percent at 2,941.52 (close)
Hong Kong – Hang Seng: DOWN 0.7 percent at 28,772.06 (close)
Pound/dollar: UP at $1.3254 from $1.3097 at 2200 GMT
Euro/pound: DOWN at 85.93 pence from 86.72 pence
Euro/dollar: UP at $1.1389 from $1.1358
Dollar/yen: DOWN at 110.58 yen from 111.06 yen
Oil – Brent Crude: UP 45 cents at $65.21 per barrel
Oil – West Texas Intermediate: UP 2 cents at $55.50 per barrel
BSS/AFP/HR/1005