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Pound wobbles as Brexit speculation tests investor nerves
LONDON, April 10, 2019 (BSS/AFP) – The British pound gyrated Tuesday as
rumours and uncertainty about the Brexit endgame played havoc with investor
nerves.
Prime Minister Theresa May launched a new diplomatic push to avert a no-
deal Brexit and secure a new delay to the date for leaving the bloc.
Sterling bobbed briefly above $1.31 in late morning foreign exchange
deals, but then fell back against both the dollar and the euro.
“In a clear example of how headline driven the pound is at present,
there’s been a swift move higher and just as quick a drop back lower as the
latest round of Brexit rumour and counter-rumour hit the news wires,” said
David Cheetham, an analyst with XTB.
He cited reports, later denied, that German Chancellor Angela Merkel was
willing to grant a five-year time limit on the backstop which saw traders
rush to buy the pound in anticipation of a breakthrough.
“However, the gains were fleeting and they were promptly handed back when
it was confirmed the reports were untrue and we can expect more of this sort
of thing in the coming days,” Cheetham predicted.
In the event, both France and Germany said that they could agree to a
Brexit delay.
German Chancellor Angela Merkel, according to a source from her party,
sees an extension up to early 2020 as “possible”, while an aide to French
President Emmanuel Macron said a delay “within limits” was an option, but a
year “seems too long”.
Both statements helped lift sterling off the day’s worst levels.
Belgium said Tuesday it is to host a mini-summit of the EU members most
exposed to the dangers of a no-deal Brexit on Wednesday.
Also Tuesday, the IMF issued a stern warning, saying a “no-deal” Brexit
would send the British economy into severe shock.
– ‘Wild week’ –
The pound is set for “another wild week” amid uncertainty over the shape
of Brexit, said FXTM analyst Lukman Otunuga.
“When dealing with Brexit, one should always expect the unexpected and
this will remain the mantra until more clarity is provided,” he said.
European and US stock markets meanwhile dropped as traders detected cooler
relations between the United States and China over trade than they had
previously hoped for, with flaring trade tensions between the US and the
European Union adding to worries.
President Donald Trump on Tuesday lashed out at the EU, vowing to slap
tariffs on billions in EU imports in retaliation for subsidies to aviation
giant Airbus.
Markets remain on tenterhooks on the eve of the European Central Bank’s
interest rate decision — and publication of the US Federal Reserve’s meeting
minutes.
Earnings season also kicks off in earnest this week, with expectations low
but observers hoping for some positive forward guidance.
BSS/AFP/HR/1020