Tuesday, 17th May 2022
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Pound tumbles on Brexit agony

The pound struck four-month lows against the dollar Wednesday after British MPs slammed Prime Minister Theresa May's latest attempt to pass her Brexit plan.

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 pound struck four-month lows against the dollar Wednesday after British MPs slammed Prime Minister Theresa May’s latest attempt to pass her Brexit plan.

In London trade, sterling sank below $1.2660 in the afternoon, a level was last seen in January, while the European single currency hit a three-month high at 88.25 pence.

“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,” he warned.

May has already failed three times to pass her controversial withdrawal agreement in parliament and has vowed to set out departure plans shortly after the next vote on her deal.

European stock markets meanwhile reversed an earlier, firm trend to push downwards as dealers awaited the latest developments on the China-US trade war.

On Wall Street, the Dow index lost around 80 points at the opening.

Analysts warned that stocks markets were on edge and any unsavoury headlines could precipitate a deeper sell-off.

Sterling had rallied Tuesday after prime minister May 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 currency 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 the fourth time.

‘Like a lead balloon’
“May’s latest attempt to conjure up a viable compromise EU withdrawal bill went down like a lead balloon in her own party — and didn’t get visible support from anyone else, merely adding to uncertainty,” noted Societe Generale analyst Kit Juckes.

Failure to get the deal through parliament will more than likely see May resign and possibly be replaced by a more hardline leader — most bets are on the controversial Boris Johnson — who may well push for a no-deal exit, a scenario that could spell economic hardship.

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.

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 reports emerged that Trump is now considering banning Chinese surveillance camera makers from getting access to US components, in a similar move to that against to Huawei, which could further stoke tensions.

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.

Oil prices dipped after data pointed to a surprise increase in US inventories, while Washington appeared to tone down its rhetoric from recent weeks with Iran, saying it did not want a war with the Islamic republic.

– Key figures around 1330 GMT –
Pound/dollar: DOWN at $1.2657 from $1.2706 at 2100 GMT

Euro/pound: UP at 88.25 pence from 87.84 pence

Euro/dollar: UP at $1.1166 from $1.1161

Dollar/yen: UP at 110.57 yen from 110.50 yen

London – FTSE 100: DOWN 0.1 percent at 7,323.33 points

Frankfurt – DAX 30: DOWN 0.3 percent at 12,103.28

Paris – CAC 40: DOWN 0.5 percent at 5,359.35

EURO STOXX 50: DOWN 0.4 percent at 3,371.55

New York – Dow: DOWN 0.3 percent at 25,794.04

Tokyo – Nikkei 225: UP 0.1 percent at 21,283.37 (close)

Hong Kong – Hang Seng: UP 0.2 percent at 27,705.94 (close)

Shanghai – Composite: DOWN 0.5 percent at 2,891.70 (close)

Oil – Brent Crude: DOWN 59 cents at $71.59 per barrel

Oil – West Texas Intermediate: DOWN 92 cents at $62.17

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