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Sterling holds above $1.32 with all eyes on Brexit drama
LONDON, March 28, 2019 (BSS/AFP) – The British pound rose to hold well
above $1.32 on Wednesday and also posted gains against the euro as investors
eyed receding no-deal risks on another day of high drama in the long-running
Brexit saga.
A budding recovery in Europe’s stock markets was cut short abruptly when
Wall Street turned lower as growth worries returned to the fore.
“Though not quite as bad as the Dow, the European indices were
nevertheless led lower by that red start to trading across the pond,” said
Spreadex analyst Connor Campbell.
Earlier, Asian equities mostly rose but traders remain on edge about the
global economic outlook, while Brexit continues to hog the headlines.
Britain’s parliament will hold a series of so-called “indicative” votes in
the European evening to seek an alternative Brexit solution as pressure
mounts on Prime Minister Theresa May to resign if she wants her own unpopular
plan approved.
Sterling had rallied Tuesday on fresh hope that May would avoid a chaotic
no-deal departure from the European Union. Yet risks remained as Wednesday’s
“Brexit horror-show/soap opera”, as Societe Generale analyst Kit Juckes
called it, unfolded.
– ‘As uncertain as ever’ –
“What happens next is as uncertain as ever and one thing is clear — the
foreign exchange market… is still seeing risk and positions taken off the
table,” Juckes said.
MPs will now choose whether to cancel Brexit, hold another referendum,
vote for a deal including a customs union and single market membership, or
leave the EU without a deal, though the government is not bound by law to
implement the decision.
In a fresh twist, May’s twice-rejected divorce plan could be revived after
Brexit hardliner Jacob Rees-Mogg — one of her most vociferous and high-
profile critics — said he would back it, while another, Boris Johnson,
hinted that he also could.
“Though Wednesday is another… big day in the Brexit process, the
indicative votes likely won’t actually take place until 7:00 pm (1900 GMT)
this evening, meaning any reaction to the results will have to wait until
Thursday morning,” said Campbell at Spreadex.
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– Alphabet soup –
“Most investors’ attention (is) on Westminster and an alphabet soup of
parliamentary motions that could shape the future direction of the Brexit
grid lock,” said CMC Markets analyst Michael Hewson.
Brussels has given London a new extended deadline of April 12 to get May’s
deal ratified or find a new way out. That replaced the previous Brexit date
of March 29.
“Though avoiding a swift but hard Brexit is good news for the pound, going
into a protracted period of uncertainty would continue to damage domestic
industries and the currency,” said City Index analyst Fiona Cincotta.
Europe’s banking sector escaped the subdued mood on the continent’s
bourses thanks to ECB chief Mario Draghi saying that the central bank could
mitigate the side effects of negative interest rates which have hurt banks.
Oil prices reversed an earlier firm trend to trade lower in late European
business as growth worries took their toll on the commodity.
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