Pound drops as Johnson’s Brexit saga continues

Pound drops as Johnson’s Brexit saga continues

Mon 21 October 2019:

That defeat leaves Johnson under mounting pressure to find a way out of paralysing impasse on when and how Britain would leave the EU after the country narrowly voted to exit in a 2016 referendum.

Johnson has reluctantly sent European Council President Donald Tusk a letter legally imposed on him by parliament requesting an extension — but refused to sign it.

The Conservative leader sent a second, signed letter insisting he was not seeking an extension to the Brexit deadline, which has already been postponed twice, warning that “a further extension would damage the interests of the UK and our EU partners”.

Having failed to back a divorce deal, which Johnson had secured on Thursday, MPs triggered a law requiring him to write to EU leaders asking to delay Brexit to avoid the risk that Britain crashes out in less than a fortnight.

Brussels officials pressed on with plans to ratify the divorce deal as European leaders considered Johnson’s delay request.

“The EU will probably pursue this strategy until there is clarity on the British side,” he said, speaking on condition of anonymity.

Tusk will spend a “few days” canvassing member state leaders, and diplomats said this would mean the British parliament will have to vote on Brexit again before hearing their decision on the October 31 departure.

MPs voted by 322 votes to 306 on Saturday to support former Conservative MP Oliver Letwin’s amendment to buy extra time.

Letwin said he would now switch and vote for the deal. Former interior minister Amber Rudd said the same, meaning Johnson is just a few votes short.

“We appear to have now the numbers to get this through,” said Raab.

The Brexit date has already been pushed back twice from March 29, to the fury of those who wanted to abandon Britain’s European project after nearly 50 years.

Pound dips

Sterling fell on Monday after MPs voted to delay passing British Prime Minister Boris Johnson’s Brexit deal, though losses were limited by hopes the country can eventually avoid crashing out of the EU without a divorce agreement in place.

The House of Commons sat on a Saturday for the first time in almost four decades to consider Johnson’s deal in a vote that was seen as a potential turning point in the long-running Brexit saga.

But instead of delivering a verdict on the deal itself, lawmakers voted to force Johnson to ask the European Union for another Brexit delay, hoping to avoid crashing out of the bloc on October 31 with no agreement in place.

The prime minister is hoping to bring the deal back to the House for a vote on Monday but that might fall foul of parliamentary procedure, with Speaker John Bercow to rule on it later.

In early Asian trade, the pound — which last week hit five-month highs on optimism for a deal — dropped 0.6% against the dollar and the euro.

Saturday’s vote meant more waiting for traders, Shinichiro Kadota, exchange strategist at Barclays Securities in Japan, told AFP.

“There had been hopes late last week that this issue would finally see a settlement. But now it’s been shelved,” he said.

“The pound rallied to close to $1.30 from $1.22… We can say it is holding firm, which shows hopes (for avoiding no-deal Brexit) have not been dashed.”

 ‘Substantial progress’ 

Rodrigo Catril, a senior forex strategist at National Australia Bank said the market was not in “wait-and-see mode”.

“We saw the pound lose a little bit of ground, but from the perspective of what it’s gained over the past week, that’s really minimal,” he told AFP.

Catril said it appeared a deal would be done before October 31 but a great deal of uncertainty remained, including the possibility of a “confirmatory vote”, or second Brexit referendum.

Asian equity markets were a mixed bag after China’s top trade negotiator Liu He said at the weekend that Beijing and Washington had made “substantial progress” towards wrapping up a partial trade deal announced earlier this month.

The deal offered China a temporary reprieve from tariffs planned for mid-October, while Beijing said it would hike purchases of US agricultural goods.

But it did not roll back any of the duties already imposed on hundreds of billions of dollars in exports to the US, nor address another round of levies due in December.

Still, the upbeat comments provided a boost to the yuan, which rose 0.2% against the dollar.

And Brett Ewing, chief market strategist at First Franklin Financial Services, told Bloomberg TV: “It would be significant if they can get a phase one deal signed before Thanksgiving — the probability of that is probably a little bit over 60% right now.

“This is a very important issue, and I think it could remove a lot of uncertainty.”

In early trade, Hong Kong was up 0.2% and Tokyo went into the break 0.3% higher with Singapore, Seoul and Wellington also up.

But Shanghai dipped 0.4% and Sydney shed 0.1%, while Taipei and Manila were also in the red.

– Key figures around 0230 GMT –

Pound/dollar: DOWN at $1.2911 from $1.2989 at 2100 GMT on Friday

Euro/pound: UP at 86.41 pence from 86.20 pence

Euro/dollar: DOWN at $1.1156 from $1.1174

Dollar/yen: UP at 108.47 yen from 108.35 yen

Tokyo – Nikkei 225: UP 0.3% at 22,555.34 (break)

Hong Kong – Hang Seng: UP 0.2% at 26,764.86

Shanghai – Composite: DOWN 0.4% at 2,927.76

West Texas Intermediate: DOWN 17 cents at $53.61 per barrel

Brent North Sea crude: DOWN 26 cents at $59.16 per barrel

New York – Dow: DOWN 1.0% at 26,770.20 (close)

London – FTSE 100: DOWN 0.4% at 7,150.57 (close)

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