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Pound jumps on Brexit hopes as global stocks firmer

13 September 2019   |   4:37 pm
The British pound hit a seven-week high against the dollar Friday on easing fears of a no-deal Brexit.

The British pound hit a seven-week high against the dollar Friday on easing fears of a no-deal Brexit.

Stock markets meanwhile won support after China said some US agricultural products including pork and soybeans would be exempt from added tariffs, ahead of trade talks between Beijing and Washington scheduled for October.

The announcement is the latest in a series of appeasement measures between the world’s two biggest economies, who for the past year have been locked in a bitter trade war resulting in tit-for-tat tariffs on hundreds of billions of dollars in bilateral trade.

In foreign exchange, the pound was in focus after the UK currency jumped one percent to $1.2476, the highest level since late July.

Sterling won strong ground also versus the euro, which had been gaining on European Central Bank plans to stimulate the struggling eurozone economy.

The pound “has rallied… as traders are less fearful about the possibility of a no-deal Brexit”, noted David Madden, analyst at CMC Markets UK.

It comes after Britain’s parliamentary speaker warned Prime Minister Boris Johnson not to disobey the law by refusing to ask for a Brexit delay and vowed to thwart any attempt to circumvent legislation.

– ‘Most terrible example’ –
Parliament passed a law earlier this month aimed at preventing a no-deal Brexit, but Johnson is adamant Britain will still leave the EU on schedule on October 31 with or without a withdrawal agreement.

The speaker of Britain’s House of Commons John Bercow said disobeying the law “would be the most terrible example to set to the rest of society”, according to Britain’s Press Association news agency.

In a speech in London on Thursday, Bercow warned if the government comes close to doing so, parliament “would want to cut off such a possibility and do so forcefully”.

The pound’s rally in reaction to Bercow hit London’s benchmark FTSE 100 stocks index that features a number of multinationals earning in dollars.

“The FTSE 100 is slightly lower… as the strength of sterling is causing the British index to underperform against its continental counterparts,” Madden added.

“Internationally focused firms… are lower.”

No big bazooka
Earlier, equities rose in Asia after the ECB on Thursday unveiled a fresh round of economic stimulus and another interest rate cut.

Global markets had been buoyed this week by a growing sense that central banks globally were set on easing monetary policy to support growth, and the ECB did not disappoint.

It said it would restart its bond-buying quantitative easing programme to boost liquidity, provide support for struggling banks and reduce borrowing costs deeper into negative territory in a bid to kickstart lending.

The announcement, while slightly short of expectations, was broadly cheered by markets, sending equities in Europe and New York higher Thursday.

“In the end, it wasn’t a big bazooka, but ECB President Mario Draghi did his level best trying to convince investors that monetary policy will remain extremely accommodative for some considerable time to come,” said Gavin Friend, a senior market strategist at National Australia Bank.

The news also provided further hope that the Federal Reserve would cut rates at its meeting next week, even though data showed a jump in US inflation last month.

– Key figures around 1100 GMT –
Pound/dollar: UP at $1.2451 from $1.2337 at 2030 GMT

Euro/pound: DOWN at 89.11 pence from 89.67 pence

Euro/dollar: UP at $1.1097 from $1.1064

Dollar/yen: DOWN at 108.00 yen from 108.11 yen

London – FTSE 100: FLAT at 7,341.68 points

Frankfurt – DAX 30: UP 0.5 percent at 12,471.06

Paris – CAC 40: UP 0.4 percent at 5,667.83

EURO STOXX 50: UP 0.4 percent at 3,552.96

Tokyo – Nikkei 225: UP 1.1 percent at 21,988.29 (close)

Hong Kong – Hang Seng: UP 1.0 percent at 27,352.69 (close)

Shanghai – Composite: Closed for a holiday

New York – Dow: UP 0.2 percent at 27,182.45 (close)

Brent North Sea crude: DOWN 16 cents at $60.22 per barrel

West Texas Intermediate: DOWN five cents at $55.04 per barrel

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