Pound resilient as Brexit plot thickens

Pound resilient as Brexit plot thickens

British pound
A counting machine tallies British pound notes at a currency exchange. (MOHD RASFAN/AFP)

LONDON: The pound strengthened against both the dollar and the euro on Tuesday (Sep 10) as investors took heart from legislation blocking a no-deal Brexit.

Sterling also received a boost from stronger British economic growth than markets had been expecting and statistics showing unemployment at a 45-year low.

This in turn fuelled expectations that the Bank of England will refrain from cutting rates which would likely undermine the already embattled currency further still.

"With the risk of an imminent no deal Brexit declining, the market is now pricing less aggressive easing from the Bank of England," said Petr Krpata, strategist at ING, saying this had allowed sterling to outperform its peers.

European stock markets, meanwhile, drifted sideways awaiting a key European Central Bank meeting this week, while US markets were soft towards the late New York morning.

'ANY SENSE OF CONTROL'?

The British parliament is now suspended, which could lead to a period of relative Brexit calm, analysts said.

"With no more parliamentary sessions due for five weeks the focus now turns to the prospects of a new deal being negotiated between the UK and the EU," said XTB analyst David Cheetham.

British Prime Minister Boris Johnson failed again late on Monday to get MPs to back a snap election.

But City Index analyst Fiona Cincotta cautioned that the pound remains fragile.

"With no resolution to Brexit or any sense of control returning to UK politics, the pound could struggle to keep its head above water in the coming sessions," she said.

Just before Westminster lawmakers broke up for five weeks, lawmakers inflicted yet another defeat on the new premier, who has been thwarted in his attempts to call an early poll.

ECB-WATCHING

Europe's main stock markets showed mild gains at the close as investors mulled speculation that the ECB could deliver economy-boosting measures on Thursday.

"Traders are playing the wait and see game in relation to the ECB meeting," noted CMC Markets analyst David Madden.

"To a certain extent, some form of monetary easing from the ECB has been priced in."

However, a slightly firmer euro against the dollar pointed to expectations of limited ECB action.

A week later, the US Federal Reserve is tipped to announce a further reduction in borrowing costs.

Oil prices meanwhile rose after Saudi Arabia's new energy minister, Prince Abdulaziz bin Salman, said output cuts would benefit all exporting nations. The remarks suggested he would support reductions to address an oversupplied market and sagging prices.

Key figures around 1540 GMT:

Pound/dollar: UP at US$1.2364 from US$1.2346 at 2100 GMT

Euro/pound: DOWN at 89.40 pence from 89.49 pence

Euro/dollar: UP at US$1.1050 from US$1.1048

Dollar/yen: UP at 107.29 yen from 107.24 yen

London - FTSE 100: UP 0.4 per cent at 7,267.95 points (close)

Frankfurt - DAX 30: UP 0.4 per cent at 12,268.71 (close)

Paris - CAC 40: UP 0.1 per cent at 5,593.21 (close)

EURO STOXX 50: UP 0.1 per cent 3,498.99

Tokyo - Nikkei 225: UP 0.4 per cent at 21,392.10 (close)

Hong Kong - Hang Seng: FLAT at 26,683.68 (close)

Shanghai - Composite: DOWN 0.1 per cent at 3,021.20 (close)

Brent North Sea crude: UP 92 cents at US$63.51 per barrel

West Texas Intermediate: UP 59 cents at US$58.44 per barrel

Source: AFP/de

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