Pound tops $1.23 on fading no-deal Brexit prospect

Sep 05, 2019: The British pound topped $1.23 on Thursday, hitting a one-month peak on fading prospects of a “no deal” Brexit after a series of parliamentary votes tore up Prime Minister Boris Johnson's hardline stance.

By about 1020 GMT, sterling had surged to $1.2347, the highest level since July 29 having plunged to multi-years lows Tuesday.

Asian and European stock markets mainly rose Thursday, but London was hit by the strong pound that hurts multinationals whose earnings are mostly in foreign currencies.

Parliament is currently rushing through legislation designed to keep Johnson from breaking Britain off from the European Union without a trade deal.

They appeared on course to do so by Monday — a victory that would be accomplished just ahead of five-week shutdown of parliament Johnson controversially ordered last month.

“News that the bill to stop a no deal Brexit should complete its passage through the House of Lords by Friday afternoon has put fresh legs on the pound's rally,” City Index analyst Fiona Cincotta told.

“After a volatile start, sterling has now pushed over $1.23 as Britain moves further back from the brink of a no-deal Brexit.

“Whilst there are clearly some hurdles still to be overcome, pound traders are feeling significantly more optimistic about the UK's eventual exit from the EU,” she added.

The embattled British currency had tanked on Tuesday to $1.1959 — which was the pound's weakest level since 1985 except for a 2016 “flash crash”.

Yet it has since rallied on rising hopes that Britain will not quit the European Union without a trade deal on October 31.

“The pound has been behaving as a tidy barometer of the odds of a no-deal Brexit,” Rabobank analyst Jane Foley told AFP.

“Just as fears of a no-deal Brexit pushed the pound below $1.20 earlier this week, expectations that MPs will succeed in delaying Brexit beyond October 31 have resulting in a relief rally back to $1.23.

“The pound is clearly not out of the woods with political uncertainty still at very elevated levels — but the risk of a disorderly Brexit next month at least looks set to be pushed off the table,” Foley added.

The bill would force Johnson to seek a three-month Brexit extension until January 31 should no deal emerge from an EU summit in Brussels on October 17-18.

AFP/APP

Posted on: 2019-09-05T16:05:00+05:00

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