Pound drops as Brexit disarray drags on

Pound drops as Brexit disarray drags on

US dollar, Swiss franc, British pound and Euro bank notes
A picture illustration of US dollar, Swiss franc, British pound and Euro bank notes. (REUTERS/Kacper Pempel/Illustration/File Photo)

LONDON: The pound dropped against the dollar and euro on Tuesday (Apr 2) as concerns grew that Britain was increasingly likely to crash out of the EU next week without an orderly withdrawal agreement.

A day after British MPs once again rejected a series of alternatives to Prime Minister Theresa May's divorce deal, the EU's chief negotiator Michel Barnier warned that a "no-deal" Brexit is "day after day more likely".

French President Emmanuel Macron warned that the EU "would not be held hostage" and a lengthy extension of Britain's Apr 12 deadline was "not a certainty".

"If the United Kingdom is unable three years after the referendum to propose a solution that commands a majority, it will have chosen de facto for itself to leave without a deal and we are unable to prevent this failure," he said.

The pound was down about 0.5 per cent versus the dollar in early evening trading.

The fall spurred London's benchmark FTSE 100 index - which features several multinationals who earn vast sums in dollars - to surge by more than one per cent to a six-month high.

"The Brexit-weakened pound offered support to the UK index, ensuring that it rallied ahead of its European counterparts," said Fiona Cincotta, senior market analyst at City Index.

"The only reason that the pound hasn't fallen further today is because MPs are pushing to move avoiding a no-deal Brexit into law."


Trading on Wall Street was down at midday after a US government report that orders for durable goods - a closely-watched measure seen as a proxy for business investment - fell in February by far more than expected.

Patrick O'Hare, an analyst at Briefing.com in the US, said it was "possible that a little bit of buyer fatigue is setting in" after all three US indices added more than one per cent on Monday.

"No one should be terribly surprised that there is a subdued tone," he said.

"The stock market made a nice leap Monday, hot on the heels of a nice leap on Friday, which capped off a triple long jump over January, February, and March."

The World Trade Organisation sounded a warning about the economic outlook on Tuesday, forecasting that global trade growth would be lower in 2019 than last year due to widespread "tensions" and economic uncertainty.

International Monetary Fund chief Christine Lagarde also struck a cautious tone, warning that the "expected rebound in global growth this year is precarious".

"This is a delicate moment that requires us to handle with care," she said in prepared remarks at the US Chamber of Commerce.


Traders are now awaiting the start of the next round of top-level China-US trade talks in Washington, after reports of progress in last week's meeting in Beijing.

A series of olive branch measures from the Chinese side has lifted hopes the two will eventually reach a deal to end their tariffs row, which dragged on equities at the end of 2018.

This week also sees the release of US March jobs data, which are closely watched for an idea about the state of the economy, with the Federal Reserve also using the figures to map its path for monetary policy.

The world's most popular cryptocurrency Bitcoin meanwhile briefly surged above the US$5,000 mark - its highest level since November.

Analysts struggled to explain the surprise jump in the shadowy and volatile world of crypto trading, with CMC Markets' Michael Hewson saying there was "little in the way of news as to what might have driven the move".

Key figures around 1540 GMT:

Pound/dollar: DOWN at US$1.3026 from US$1.3103 at 2100 GMT on Monday

Euro/pound: UP at 85.85 pence from 85.58 pence

Euro/dollar: DOWN at US$1.1187 from US$1.1213

Dollar/yen: DOWN at 111.31 yen from 111.35 yen

London - FTSE 100: UP 1.0 per cent at 7,391.12 points (close)

Frankfurt - DAX 30: UP 0.6 per cent at 11,754.79 (close)

Paris - CAC 40: UP 0.3 per cent at 5,423.47 (close)

EURO STOXX 50: UP 0.3 per cent at 3,395.70

New York - Dow: DOWN 0.3 per cent at 26,146.27

Tokyo - Nikkei 225: FLAT at 21,505.31 (close)

Hong Kong - Hang Seng: UP 0.2 per cent at 29,624.67 (close)

Shanghai - Composite: UP 0.2 per cent at 3,176.82 (close)

Oil - Brent Crude: DOWN 0.7 cents at US$69.10 per barrel

Oil - West Texas Intermediate: UP 48 cents at US$62.09 per barrel

Source: AFP/de