Pound tops $1.23 on fading no-deal Brexit prospect

AFP
London, United Kingdom Published: Sep 05, 2019, 04:35 PM(IST)

File photo. Photograph:( AFP )

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Asian and European stock markets mainly rose Thursday, but London was hit by the strong pound that hurts multinationals whose earnings are mostly in foreign currencies.

The British pound topped $1.23 on Thursday, hitting a one-month peak on fading prospects of a "no-deal" Brexit after a series of parliamentary votes tore up Prime Minister Boris Johnson's hardline stance.

By about 1020 GMT, sterling had surged to $1.2347, the highest level since July 29 having plunged to multi-year lows Tuesday.

Asian and European stock markets mainly rose Thursday, but London was hit by the strong pound that hurts multinationals whose earnings are mostly in foreign currencies.

Parliament is currently rushing through legislation designed to keep Johnson from breaking Britain off from the European Union without a trade deal.

They appeared on course to do so by Monday a victory that would be accomplished just ahead of the five-week shutdown of parliament Johnson controversially ordered last month.

'Fresh legs on the pound'

"News that the bill to stop a no-deal Brexit should complete its passage through the House of Lords by Friday afternoon has put fresh legs on the pound's rally," City Index analyst Fiona Cincotta told AFP.

"After a volatile start, sterling has now pushed over $1.23 as Britain moves further back from the brink of a no-deal Brexit.

"Whilst there are clearly some hurdles still to be overcome, pound traders are feeling significantly more optimistic about the UK's eventual exit from the EU," she added.

The embattled British currency had tanked on Tuesday to $1.1959 which was the pound's weakest level since 1985 except for a 2016 "flash crash".

Yet it has since rallied on rising hopes that Britain will not quit the European Union without a trade deal on October 31.

"The pound has been behaving as a tidy barometer of the odds of a no-deal Brexit," Rabobank analyst Jane Foley told AFP.

"Just as fears of a no-deal Brexit pushed the pound below $1.20 earlier this week, expectations that MPs will succeed in delaying Brexit beyond October 31 have resulting in a relief rally back to $1.23.

"The pound is clearly not out of the woods with political uncertainty still at very elevated levels but the risk of a disorderly Brexit next month at least looks set to be pushed off the table," Foley added.

The bill would force Johnson to seek a three-month Brexit extension until January 31 should no deal emerge from an EU summit in Brussels on October 17-18.

Stocks mainly climb

Elsewhere, equities mostly rose, building on the previous day's advance as investors were cheered by a number of positive developments on trade, Hong Kong and Europe.

Markets were already on an upward trajectory after the leader of Hong Kong on Wednesday withdrew a controversial extradition bill that had sparked months of sometimes violent protests in the financial hub.

But the good news kept coming as the day wore on, with news that Italy had formed a new moderate, pro-European government, while British MPs moved closer to preventing a no-deal Brexit.

Then on Thursday morning, China announced it would resume trade talks with the United States in Washington next month.

However, Hong Kong ended with marginal losses. 

Having soared almost four per cent on Wednesday on the back of Chief Executive Carrie Lam's shock decision, profit-takers moved in.

Lam on Thursday urged pro-democracy protesters to end their demonstrations but her surprise decision to bow to one of their key demands was condemned as too little, too late.

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