Sterling holds above US$1.32 with all eyes on Brexit dramaThursday, March 28, 2019
London , United Kingdom (AFP) — The British pound rose to hold well above US$1.32 on Wednesday and also posted gains against the euro as investors eyed receding no-deal risks on another day of high drama in the long-running Brexit saga.
A budding recovery in Europe's stock markets was cut short abruptly when Wall Street turned lower as growth worries returned to the fore.
“Though not quite as bad as the Dow, the European indices were nevertheless led lower by that red start to trading across the pond,” said Spreadex analyst Connor Campbell.
Earlier, Asian equities mostly rose but traders remain on edge about the global economic outlook, while Brexit continues to hog the headlines.
Britain's parliament will hold a series of so-called indicative votes in the European evening to seek an alternative Brexit solution as pressure mounts on Prime Minister Theresa May to resign if she wants her own unpopular plan approved.
Sterling had rallied Tuesday on fresh hope that May would avoid a chaotic no-deal departure from the European Union. Yet risks remained as Wednesday's “Brexit horror-show/soap opera”, as Societe Generale analyst Kit Juckes called it, unfolded.
'As uncertain as ever'
“What happens next is as uncertain as ever and one thing is clear — the foreign exchange market... is still seeing risk and positions taken off the table,” Juckes said.
MPs will now choose whether to cancel Brexit, hold another referendum, vote for a deal including a customs union and single market membership, or leave the EU without a deal, though the government is not bound by law to implement the decision.
In a fresh twist, May's twice-rejected divorce plan could be revived after Brexit hard-liner Jacob Rees-Mogg — one of her most vociferous and high-profile critics — said he would back it, while another, Boris Johnson, hinted that he also could.
“Though Wednesday is another... big day in the Brexit process, the indicative votes likely won't actually take place until 7:00 pm (1900 GMT) this evening, meaning any reaction to the results will have to wait until Thursday morning,” said Campbell at Spreadex.
“Most investors' attention (is) on Westminster and an alphabet soup of parliamentary motions that could shape the future direction of the Brexit gridlock,” said CMC Markets analyst Michael Hewson.
Brussels has given London a new extended deadline of April 12 to get May's deal ratified or find a new way out. That replaced the previous Brexit date of March 29.
“Though avoiding a swift but hard Brexit is good news for the pound, going into a protracted period of uncertainty would continue to damage domestic industries and the currency,” said City Index analyst Fiona Cincotta.
Europe's banking sector escaped the subdued mood on the continent's bourses thanks to ECB chief Mario Draghi saying that the central bank could mitigate the side effects of negative interest rates which have hurt banks.
Oil prices reversed an earlier firm trend to trade lower in late European business as growth worries took their toll on the commodity.