LONDON: The pound fell sharply on Wednesday (Mar 20) after Prime Minister Theresa May announced Britain was seeking a delay to its exit from the European Union until Jun 30, while investors awaited the US Federal Reserve's interest rate call.
"The pound's Wednesday only got worse after the confirmation that Theresa May is seeking a short delay from the EU, one that arguably does not give the government enough time to get through a sterling-positive Brexit deal," Spreadex analyst Connor Campbell told AFP.
"It appears that, despite the various votes highlighting MPs unwilling to leave the EU without a deal, that kind of disastrous exit is still very much on the table."
The pound lost about half a pence in the space of roughly 10 minutes after May announced the delay, falling to US$1.3147, bringing its loss for the day to around one percent.
May had been widely expected to ask the bloc for an extension of the Mar 29 deadline for leaving, having seen her exit proposals twice rejected MPs.
The European Commission, for its part, warned EU leaders in an internal briefing note ahead of an summit in Brussels that delaying Brexit to Jun 30 would bring "serious legal and political risks".
It urged a shorter postponement to before European Parliament elections in May, or a much longer one at least till the end of this year.
European Council president Donald Tusk said later Wednesday that EU leaders could approve a short delay to Brexit if British lawmakers finally approve the withdrawal deal they have twice rejected.
Later on Wednesday, the Federal Reserve's March policy meeting concludes, with analysts predicting it will announce a slower pace of interest rate hikes as the world's biggest economy shows signs of softening amid trade tensions.
Investors also eyed China-US trade talks, optimism about which have helped propel equities higher across the world this year - offsetting concerns about the outlook for the global economy,
But dealers have been spooked by a report that some US officials are feeling some pushback from China on a number of demands, including on the crucial issue of intellectual property.
The unnamed negotiators said the Chinese side was growing concerned at the lack of assurances that US duties would be removed, according to the Bloomberg story.
'FLOODGATES COULD OPEN' FOR BAYER
In Europe, Frankfurt fell the heaviest with Bayer shares tumbling after a US jury ruled its weedkiller Roundup was a "substantial factor" in an amateur gardener's cancer.
Frankfurt stocks meanwhile sank 1.6 per cent as the threat to German giant Bayer and its subsidiary Monsanto from US litigation swelled.
A wave of lawsuits has put pressure on Bayer since its US$63-billion takeover of Monsanto last year, spooking investors who worry damages payouts could escalate if the firm fails to convince courts its product is safe.
"Bayer shares have sold-off sharply ... after a US jury found that the company's weed killer, Roundup, caused cancer," said CMC Markets analyst David Madden.
"This could open the floodgates to further cases, and the group might have to set aside vast sums of money for potential cases."
Bayer finished the day down 9.6 per cent at €63.
Key figures around 1530 GMT:
Pound/dollar: DOWN at US$1.3205 from US$1.3268 at 2100 GMT on Tuesday
Euro/pound: UP at 85.99 pence from 85.56 pence
Euro/dollar: UP at US$1.1355 from US$1.1352
Dollar/yen: DOWN at 111.38 yen from 111.39 yen
London - FTSE 100: DOWN 0.5 per cent at 7,291.01 points (close)
Frankfurt - DAX 30: DOWN 1.6 per cent at 11,603.89
Paris - CAC 40: DOWN 0.8 per cent at 5,382.66
Tokyo - Nikkei 225: UP 0.2 per cent at 21,608.92 (close)
Hong Kong - Hang Seng: DOWN 0.5 per cent at 29,320.97 (close)
Shanghai - Composite: FLAT at 3,090.64 (close)
Oil - Brent Crude: UP 68 cents at US$68.29 per barrel
Oil - West Texas Intermediate: UP 72 cents at US$59.75 per barrel