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Pound goes on rollercoaster ride after Brexit draft deal
NEW YORK, Oct 18, 2019 (BSS/AFP) – The British pound had a tumultuous
session on Thursday as a draft Brexit deal between London and Brussels
sparked both hope and skepticism in a volatile forex market.
Sterling soared to within a whisker of $1.30, striking five-month peaks,
when news flashed across traders’ screens that the European Union had reached
a draft Brexit withdrawal deal with London.
The pound held on to most of those gains for a while, absorbing a bout of
profit-taking, but then the currency plunged into negative territory when it
dawned on investors that there was no guarantee of UK parliamentary backing
for the agreement.
“After the initial relief that the UK government and EU have done a deal,
markets are worried that it still does not have enough support to get through
parliament on Saturday,” independent economist Julian Jessop told AFP.
By the end of the European business day, the pound was pretty much back to
where it started. It strengthened modestly after that.
Wall Street also finished higher, with analysts citing the Brexit deal
despite opposition from key lawmakers that threaten its prospects.
– ‘Still chance of no deal’
It is unclear how many of Prime Minister Boris Johnson’s Conservative MPs
will back the deal when he brings it to lawmakers for approval Saturday, and
whether the opposition will try to vote it down or attempt to force a fresh
referendum.
“There is still a chance for a no-deal Brexit – although the more likely
scenario would be for the Prime Minister to follow the law and request the EU
for a Brexit deadline extension, which then opens up more uncertainty,” said
Fawad Razaqzada at Forex.com.
Northern Ireland’s hardline loyalist DUP said Thursday it was “unable to
support” the draft deal.
A pre-emptive DUP announcement to the same effect issued ahead of the
draft deal had already weighed on sterling, before news from Brussels gave
the currency wings.
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“The Brexit agreement dream has been shattered by the DUP, after reports
have surfaced claiming they are still unwilling to back Johnson and his EU
divorce agreement,” said Sebastien Clements, a currency analyst at OFX.
While the pound stabilized late in the session, “all it takes is a leak
from Westminster to restart the market chaos”, he said.
– Even Wall Street likes it –
The London stock market, which usually moves in the opposite direction
from sterling, enjoyed a small rise Thursday, becoming the day’s star
performer in otherwise lacklustre European equity trading.
Wall Street also pushed higher, aided by strong earnings from Netflix and
some other companies, and by optimism over Brexit.
Alan Skrainka of Cornerstone Wealth Management acknowledged there were
doubts about the deal’s prospects but said “this is really the first tangible
sign of progress we’ve had in some time.”
– Key figures around 2050 GMT –
Pound/dollar: UP at $1.2891 from $1.2832 at 2100 GMT
Euro/pound: UP at 86.31 pence from 86.29 pence
Euro/dollar: UP at $1.1127 from $1.1072
Dollar/yen: DOWN at 108.62 yen from 108.76 yen
New York – Dow: UP 0.1 percent at 27,025.88 (close)
New York – S&P 500: UP 0.3 percent at 2,997.95 (close)
New York – Nasdaq: UP 0.4 percent at 8,156.85 (close)
London – FTSE 100: UP 0.2 percent at 7,182.32 (close)
Paris – CAC 40: DOWN 0.4 percent at 5,673.07 (close)
Frankfurt – DAX 30: DOWN 0.1 percent at 12,654.95 (close)
EURO STOXX 50: DOWN 0.3 percent at 3,588.62 (close)
Tokyo – Nikkei 225: DOWN 0.1 percent at 22,451.86 (close)
Hong Kong – Hang Seng: UP 0.7 percent at 26,848.49 (close)
Shanghai – Composite: DOWN 0.1 percent at 2,977.33 (close)
Brent North Sea crude: UP 0.8 percent at $59.91 per barrel
West Texas Intermediate: UP 1.1 percent at $53.93 per barrel
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