January 24, 2019: The British pound rose to two-month peaks against the euro and the dollar on Wednesday as traders girded for a likely dovish message from the European Central Bank.
Britain is still far from a deal with the European Union ahead of a March 29 deadline but currency traders continue to bet against a no-deal exit, seen as the worst outcome for the country.
The British currency fetched $1.3068 near 2120 GMT from $1.2954 the prior day, also advancing against the euro.
“The pound's resilience suggests that markets see a greater chance of Brexit getting delayed beyond March or possibly being put to a second referendum,” said Western Union Business Solutions Senior Market Analyst Joe Manimbo.
Hopes “Britain might avoid an ugly, economy-throttling exit from the EU” overshadowed weak factory data, Manimbo added.
Analysts are not expecting any bombshells at Thursday's European Central Bank meeting but Chief Mario Draghi could acknowledge growing risks to the Eurozone economy while sticking to the bank's patient course.
The central bank is caught at an intermediate stage of withdrawing crisis-era stimulus, having wound up net purchases of government and corporate bonds — so-called “quantitative easing” — but seeing the economy still too fragile to lift interest rates from their historic lows.
Draghi said last month that QE had been “the crucial driver of recovery in the Eurozone” since its introduction in 2015 — while insisting growth could continue after its withdrawal and blaming one-off factors for signs of weakening momentum.
Since then, new data “have done little to stop fears of a more prolonged slowdown,” ING-DiBa economist Carsten Brzeski said.
“Confidence indicators are still plunging, hard data remains weak and latest Brexit developments suggest that new turbulence in both financial markets and the real economy is still on the horizon.”
Mixed day for stocks
Equity markets in Europe and Asia mostly fell on lingering worries about US-China trade relations following news reports that suggested significant impediments to a deal.
Wall Street finished a volatile session higher following strong earnings reports from Dow members IBM, Procter & Gamble and United Technologies that lifted all three companies and boosted the Dow by 0.7 percent.
But US indices slid into negative territory for a stretch in the middle of the session amid worries over trade and the shutdown.
Economists have downgraded their growth estimates for 2019 and some financial analysts view an earnings recession — defined as two or more quarters of falling profits — as a rising possibility.
Key figures around 1715 GMT
- New York – DOW: UP 0.7 percent at 24,575.62 (close)
- New York – S&P 500: UP 0.2 percent at 2,638.70 (close)
- New York – Nasdaq: UP 0.1 percent at 7,025.77 (close)
- London – FTSE 100: DOWN 0.9 percent at 6,842.88 (close)
- Frankfurt – DAX 30: DOWN 0.2 percent at 11,071.54 (close)
- Paris – CAC 40: DOWN 0.2 percent at 4,840.38 (close)
- EURO STOXX 50: FLAT at 3,112.13 (close)
- Tokyo – Nikkei 225: DOWN 0.1 percent at 20,593.72 (close)
- Hong Kong – Hang Seng: FLAT at 27,008.20 (close)
- Shanghai – Composite: UP 0.1 percent at 2,581.00 (close)
- Euro/dollar: UP at $1.1383 from $1.1360 at 2200 GMT Tuesday
- Pound/dollar: UP at $1.3068 from $1.2954
- Dollar/yen: UP at 109.60 yen from 109.37
- Oil – Brent Crude: DOWN 36 cents at $61.14 per barrel
- Oil – West Texas Intermediate: DOWN 39 cents at $52.62 per barrel