Friday, 20th May 2022
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Pound in doldrums at start of hectic Brexit week

The British pound sank Monday to a near three-week low under $1.30, as traders fretted over Brexit on the eve of another critical parliamentary vote for Prime Minister Theresa May.

The British pound’s sell-off on Friday was the second-worst since Britain voted to leave the European Union June 23. Justin Tallis / AFP

The British pound sank Monday to a near three-week low under $1.30, as traders fretted over Brexit on the eve of another critical parliamentary vote for Prime Minister Theresa May.

In overnight Asian trade, sterling tanked to $1.2949 — the lowest since February 19. It has since bobbed back above the key $1.3 level.

The pound also dropped against the euro.

Europe’s equity markets meanwhile rose in early afternoon deals as investors snapped up bargain stock after last week’s heavy losses that had been sparked by global economic fears.

London’s benchmark FTSE 100 advanced 0.6 percent on the weak pound, which boosts share prices of key multinationals who earn vast sums abroad.

“The pound has started the new week a little on the back foot as the markets await what could be a pivotal few days on the Brexit front, with these developments remaining the primary driver of the currency for the foreseeable future,” said analyst David Cheetham at brokerage XTB.

“Helped in part by the dip in the pound, the UK stock market has begun brightly… to trade back near its highest level in three weeks.”

‘Sterling remains volatile’
The EU’s chief Brexit negotiator Michel Barnier told AFP on Monday that negotiations to break a deadlock on a deal to leave the bloc are now between May and members of her parliament.

“We held talks over the weekend and the negotiations now are between the government in London and the parliament in London,” Barnier said as he arrived at EU headquarters in Brussels to discuss Brexit with envoys from the other 27 member states.

May is nevertheless expected to reveal on Monday what changes, if any, she has secured to her EU divorce deal, on the eve of a crucial vote less than three weeks before Brexit day.

“We are 24-hours away from May’s supposed ‘meaningful’ Brexit vote and the rumour is that (she) could lose this vote by a wider margin than the last one,” said Oanda analyst Dean Popplewell.

“As expected, sterling remains volatile,” he warned.

Two months ago, parliament had overwhelmingly rejected the withdrawal agreement May has struck with the European Union, and sent her back to Brussels to renegotiate.

As MPs prepare to vote again on the deal on Tuesday, the prime minister has little to show for her efforts, prompting warnings of another humiliating defeat.

‘No progress’ for May
“Though the Prime Minister is still valiantly trying to negotiate some last minute changes with the EU, she is neither making progress in Brussels nor at home,” noted City Index analyst Fiona Cincotta.

“The choice for MPs will be either a hard Brexit or postponing this date, and the latter option seems to be gathering more momentum.”

World equities had plunged Friday as fears over the global economy were fanned by weak US job creation figures, a European Central Bank growth forecast downgrade and data showing Chinese trade fell off a cliff last month.

The Labor Department said the US economy created just 20,000 jobs last month, a fraction of what was expected.

The newsflow knocked equity markets, which have enjoyed a stellar start to the year on hopes that China and the United States will resolve their trade war.

Ahead of Wall Street’s opening, shares in Boeing were indicated more than 10 percent down after one of the company’s aircraft crashed in Ethiopia, with China, Indonesia and Ethiopia having decided to ground their respective fleets of Boeing 737 Max jets.

– Key figures at 1200 GMT –
Pound/dollar: DOWN at $1.3011 from $1.3015 at 2200 GMT

Euro/pound: UP at 86.41 pence from 86.30 pence

Euro/dollar: UP at $1.1243 from $1.1235

Dollar/yen: UP at 111.20 yen from 111.17 yen

London – FTSE 100: UP 0.6 percent at 7,143.38 points

Frankfurt – DAX 30: UP 0.4 percent at 11,497.77

Paris – CAC 40: UP 0.3 percent at 5,247.04

EURO STOXX 50: UP 0.3 percent at 3,294.72

Tokyo – Nikkei 225: UP 0.5 percent at 21,125.09 (close)

Hong Kong – Hang Seng: UP 1.0 percent at 28,503.30 (close)

Shanghai – Composite: UP 1.9 percent at 3,026.99 (close)

New York – Dow: DOWN 0.1 percent at 25,450.24 (close)

Oil – Brent Crude: UP 55 cents at $66.29 per barrel

Oil – West Texas Intermediate: UP 49 cents at $56.56

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