Sterling has rebounded and London's benchmark FTSE 100 moved higher
London (AFP) - The British pound and the London stock market recovered Wednesday ahead of parliament’s vote on whether to back a “no deal” Brexit.
Sterling and London share prices had taken a brief knock after MPs on Tuesday rejected for a second time a Brexit withdrawal deal negotiated by Prime Minister Theresa May, despite her obtaining last-minute assurances from EU officials.
But in afternoon trading on Wednesday, London’s benchmark FTSE 100 index added 0.3 percent while the pound rebounded versus the dollar and euro.
“The pound has been the main area of volatility when reflecting Brexit developments, with the FTSE 100 remaining somewhat stable despite the constant shifts,” said Joshua Mahony, senior market analyst at IG trading group.
“Make no mistake, pound’s rally this morning is markets either sniffing an opportunity for a second referendum or a deal passing,” said Viraj Patel, a foreign currency and macroeconomics strategist at Arkera, in a tweet.
A second referendum would cause a far greater initial relief rally for the pound against the dollar, he added.
British MPs will later Wednesday vote on whether the UK should leave the European Union without a deal in just over two weeks, after overwhelmingly rejecting the country’s draft Brexit divorce agreement with Brussels.
The House of Commons is expected to vote against a “no deal” Brexit, although this could still happen on March 29 anyway unless the British parliament can agree on what should happen instead.
If a no-deal Brexit is rejected, MPs will vote on Thursday on whether to seek an extension to the departure process that would conclude its 46-year EU membership.
But the European Union said it had done all it could and it was now up to Britain to decide what it wanted to do next.
The EU’s chief Brexit negotiator Michel Barnier said Brussels will not rework the painstakingly-negotiated withdrawal agreement.
Both the pound and the FTSE held up despite Britain’s finance minister Philip Hammond slashing the forecast for economic growth this year over Brexit uncertainty.
The UK economy is forecast to grow by 1.2 percent this year, down on the government’s prediction of 1.6 percent in October, Hammond said as he gave a budget update.
“Whilst Brexit continues to play out, traders will also glance across to the… budget,” said Jasper Lawler, head of research at London Capital Group.
“Whilst Brexit will clearly overshadow the event there are a few nuggets of information that will be useful including new forecasts for economic growth and public finances.”
Elsewhere Wednesday, Asian indices closed lower, eurozone stock markets traded mostly higher, and Wall Street stocks opened to the upside.
Briefing.com analyst Patrick O’Hare noted that the US stock market has been acting if it doesn’t have a care in the world.
“It could care less that the UK’s Brexit effort is a mess. It could care less that Boeing is dealing with a PR nightmare as multiple countries have grounded the 737 MAX,” he said, adding investors also appeared to be unfazed that earnings estimates for the first quarter are declining and global growth slowing down.
O’Hare said that investors appears to be reassured by assurances from central banks that policy interest rates aren’t going up anytime soon, which is supportive for stocks.
- Key figures around 1330 GMT -
Pound/dollar: UP at $1.3168 from $1.3062 at 2100 GMT on Tuesday
Euro/pound: DOWN at 85.77 pence from 86.46 pence
Euro/dollar: UP at $1.1301 from $1.1292
Dollar/yen: UP at 111.35 yen from 111.29 yen
London - FTSE 100: UP 0.3 percent at 7,172.93 points
Frankfurt - DAX 30: FLAT at 11,528.10
Paris - CAC 40: UP 0.5 percent at 5,296.86
EURO STOXX 50: UP 0.4 percent at 3,317.79
New York - DOW: UP 0.4 percent at 25,644.54
Tokyo - Nikkei 225: DOWN 1.0 percent at 21,290.24 (close)
Hong Kong - Hang Seng: DOWN 0.4 percent at 28,807.45 (close)
Shanghai - Composite: DOWN 1.1 percent at 3,026.95 (close)
Oil - Brent Crude: UP 44 cents at $67.11 per barrel
Oil - West Texas Intermediate: UP 84 cents at $57.71 per barrel