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Pound falls after UK parliament rejects Brexit plan
LONDON, March 30, 2019 (BSS/AFP) – The pound fell Friday after Britain’s
parliament again rejected a proposed deal to withdraw from the European
Union.
Sterling had been mostly stronger against both the dollar and the euro in
the runup to the vote, but then fell to its lowest point against the
greenback in more than two weeks within moments of the count.
It then went on to recoup some of the losses towards the late afternoon,
proving right analysts like ThinkMarkets’ Naeem Aslam who had predicted
“crazy moves” in sterling before voting began.
“Sterling’s midday bounce felt a long way away on Friday afternoon, as MPs
inflicted another embarrassment on a Theresa May premiership defined by
them,” said Spreadex analyst Connor Campbell.
Lawmakers in parliament’s lower House of Commons defied May’s plea to end
a political deadlock over Brexit, defeating her withdrawal agreement by 344
votes to 286.
“We thought it was going to be a lot closer,” Joshua Mahony told AFP on
the IG trading floor in London. “Everyone is now starting to wonder exactly
what happens next.”
– ‘Sleep-walking’ –
“No-one really wants to say it but we are in danger of sleepwalking into
an unintended no-deal scenario here, an outcome that looked highly unlikely
just a couple of weeks back, and this poses a major risk for the pound,” said
XTB analyst David Cheetham.
The EU Commission seemed to agree, saying after the vote that a no-deal
Brexit was now a “likely scenario”.
A scenario that, IG’s Mahony said, was on investors’ minds as they sold
off sterling.
“Whenever you’ve tracked the pound it has always been reflecting the
market sentiment surrounding the possibility of a no-deal Brexit — and I
think today’s move really does reflect that,” he said.
The pivotal vote came on the day Britain was supposed to leave the
European Union until May asked the bloc’s leaders last week for a little more
time.
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Stock markets, including London, meanwhile rallied, with investors looking
past a downgrade of US growth to focus on the next round of top-level China-
US trade talks.
– Stocks doing ok –
Although equities have been dogged by fears over the outlook for the
economy, markets have enjoyed a stellar first-quarter overall, mostly on
hopes of a US-China tariffs deal and the prospect of lower borrowing costs.
European stocks were solidly higher by the close, while Wall Street was
also firmly in the black in the early New York afternoon.
In commodities, oil prices were headed for a strong finish to the week,
having enjoyed their best quarter in 14 years, with Brent crude jumping 26
percent and WTI by 29 percent since the start of the year on tighter
supplies.
US President Donald Trump on Thursday called on OPEC to boost oil output
following the price rises since the beginning of 2019.
The Organization of Petroleum Exporting Countries in December reached a
deal with Russia and some other non-cartel producers to limit output to shore
up prices.
“While OPEC, and above all (kingpin member) Saudi Arabia, appeared in
November to be obeying US President Trump’s repeated demands to increase oil
production, his tweets now are more likely to fall on deaf ears,” analysts at
Commerzbank said Friday.
Oil futures have won support also from unrest in OPEC-member Venezuela.
“US sanctions, power outages and mismanagement are having a massive effect
on Venezuela’s oil production and oil exports at present,” they added in a
research note.
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