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Pound at four-month lows as Brexit rumbles, Asian equities simmer
HONG KONG, May 22, 2019 (BSS/AFP) – The British pound was rooted at four-
month lows Wednesday after British MPs slammed Theresa May’s latest plan to
push through her Brexit plan, increasing the chances of a no-deal divorce,
while Asian markets drifted as dealers fret over China-US tensions.
With Wall Street providing a positive lead, regional equities were mostly
on the up but analysts warned traders were on edge and any unsavoury
headlines could precipitate another sell-off.
The sterling rallied Tuesday after the prime minister unveiled her revised
EU divorce deal that included a promise for lawmakers to set a confirmatory
referendum on whatever version of Brexit they end up approving.
However, the unit fell as quickly as it had risen as opponents of the
original agreement attacked it as nothing more than a rehash.
May called the new proposals this parliament’s “last chance” to end a
political deadlock but with key MPs led by arch-Brexiters still unmoved, it
is likely to fall flat for a fourth time.
Failure to get the deal through parliament will more than likely see May
resign and possibly replaced by a more hardline leader — most bets are on
the controversial Boris Johnson — who would push for a no-deal exit, a
scenario analysts warn could spell economic hardship.
“Politicians from all sides trashed her proposals, leaving the pound mired
at four-month lows while the prime minister awaits her end of days,” said
OANDA senior market analyst Jeffrey Halley.
“A settlement remains as distant as ever.”
– ‘Headline bombs’ –
The pound edged up marginally against the dollar but is struggling to get
out of the levels last seen in January.
Dealers are keeping a close eye on developments in the China-US trade
tussle after the pair swapped tariff hikes and Donald Trump barred Chinese
telecoms giant Huawei from the US market and put it on a sales blacklist.
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A 90-day reprieve provided a semblance of hope that the row can be
resolved and the two economic superpowers will hammer out a trade deal at
some point.
But Halley warned markets will be “vulnerable to headline bombs. Most
notably, China has been very, very quiet on its intended retaliatory measures
against the US. Make no mistake, they’ve not gone away, and any unexpected
announcement by Beijing on that front could turn sentiment very quickly
indeed.”
In early trade, Hong Kong edged up 0.2 percent while Tokyo went into the
break 0.3 percent higher with Singapore, Taipei and Wellington also on the
rise.
But Shanghai, Sydney and Seoul all turned negative.
Attention is now on the release later in the day of the minutes from the
Federal Reserve’s most recent policy meeting, with hopes it will provide some
idea about the state of the US economy.
Traders will also pore over the report seeking forward guidance on its
plans for interest rates as concerns about a growth slowdown begin to set in
globally, while some observers suggest the bank could even be contemplating a
cut.
– Key figures at 0250 GMT –
Tokyo – Nikkei 225: UP 0.3 percent at 21,344.05 (break)
Hong Kong – Hang Seng: UP 0.2 percent at 27,706.98
Shanghai – Composite: DOWN 0.2 percent at 2,900.87
Pound/dollar: UP at $1.2716 from $1.2706 at 2100 GMT
Euro/pound: DOWN at 87.79 pence from 87.84 pence
Euro/dollar: UP at $1.1165 from $1.1161
Dollar/yen: UP at 110.58 yen from 110.50 yen
Oil – West Texas Intermediate: DOWN 51 cents at $62.62 per barrel (new
contract)
Oil – Brent Crude: DOWN 31 cents at $71.87 per barrel
New York – Dow: UP 0.8 percent at 25,877.33 (close)
London – FTSE 100: UP 0.3 percent at 7,328.92 (close)
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