Sterling slides on revived no-deal Brexit fears

Sterling slides on revived no-deal Brexit fears

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

LONDON: The British pound slid on Tuesday (Dec 17) on news Prime Minister Boris Johnson will outlaw any extension to a Brexit transition beyond the end of next year, reviving fears of a no-deal divorce.

By the late London afternoon, the pound was down by 1.7 per cent against the dollar.

The UK currency had surged late last week after Johnson's governing right-wing Conservative Party clinched a landslide general election victory.

"Concerns about a no-deal Brexit at the end of the transition period are exerting pressure on the pound," said analyst Michael Brown at foreign exchange firm Caxton.

Those fears also sent London's FTSE 100 shares index into negative territory on Tuesday, one day after it had risen sharply.

Johnson won a big majority on Thursday on a promise to take Britain out of the European Union by the end of January, followed by a transition period when London and Brussels negotiate a trade agreement.

European leaders have said that the December 2020 deadline would be too tight to complete a comprehensive deal.

Johnson plans to pass a law guaranteeing Britain's Brexit transition period cannot run beyond the end of 2020, a source in his office said on Tuesday.

"The move to pass a bill to legislate it was unexpected by some and has raised concerns about a no-deal Brexit once more," added XTB analyst David Cheetham.

The pound won only limited support from official data showing that Britain's unemployment rate remains at a 45-year low at 3.8 percent.


Eurozone stock markets meanwhile pulled lower as euphoria faded somewhat over the China-US trade deal.

Wall Street was slightly firmer in the late New York morning.

Most Asian bourses rose, however, following another record-breaking lead from Wall Street, after Friday's agreement between the world's top two economies ended months of wrangling and removed immediate uncertainty.

The deal, which will see Washington wind back some tariffs and China ramp up purchases of US goods as well as change its trade practices, sparked an equities surge that continued Monday in New York, with all three main indices ending at all-time highs.

But while the news has been met with broad relief, observers point out that the deal is only the first - and easiest - part of a wider agreement many think could take years to complete.

Key figures around 1745 GMT:

Pound/dollar: DOWN at US$1.3103 from US$1.3332 at 2200 GMT on Monday

Euro/pound: UP at 85.08 pence from 83.59 pence

Euro/dollar: UP at US$1.1149 from US$1.1144

Dollar/yen: DOWN at 109.54 yen from 109.55 yen

London - FTSE 100: UP 0.1 per cent at 7,525.28 points (close)

Frankfurt - DAX 30: DOWN 0.9 per cent at 13,287.83 (close)

Paris - CAC 40: DOWN 0.3 per cent at 5,968.26 (close)

EURO STOXX 50: DOWN 0.7 per cent at 3,745.28

Tokyo - Nikkei 225: UP 0.5 per cent at 24,066.12 (close)

Hong Kong - Hang Seng: UP 1.2 per cent at 27,843.71 (close)

Shanghai - Composite: UP 1.3 per cent at 3,022.42 (close)

Brent North Sea crude: UP 1.0 per cent at US$65.96 per barrel

West Texas Intermediate: UP 1.0 per cent at US$60.78 per barrel

Source: AFP/de