MPs once again defeated Boris Johnson in his bid to call a snap election, which helped the pound bounce to levels not seen since late July
Hong Kong (AFP) - The pound bounced Tuesday after Prime Minister Boris Johnson again failed to get MPs to back a snap election.
Just before Westminster lawmakers broke up for five weeks, they inflicted yet another defeat on the new premier, who has been thwarted in his attempts to call an early poll as he looks to win a majority in parliament and push through a no-deal Brexit.
MPs had earlier also voted to demand the government publish confidential documents about Britain’s readiness to leave the European Union on October 31 without a divorce deal.
The latest defeat on calling an election saw the pound – which had been slipping through Monday – rally more than one percent against the dollar from as low as $1.2234 to as much as $1.2385, its highest level since the end of July.
Data showing the British economy faring better than expected also provided support to sterling.
Johnson insists he will not ask for a delay to the October 31 Brexit date, despite MPs passing a bill that could force him to do so if he fails to reach an agreement with the EU.
Asian equity traders struggled after last week’s rally as the European Central Bank prepares for a much-anticipated meeting on Thursday with speculation it will unveil fresh economy-boosting measures, including an interest rate cut deeper into negative territory.
“With the two percent inflation target still a Japanese-style distant memory and growth slowing in Germany, Europe’s engine, the ECB had to do something,” said OANDA senior market analyst Jeffrey Halley.
“Whatever comes out on Thursday will test the limits of the effectiveness of monetary policy.”
- Crude builds on gains -
There were warnings from some analysts that a disappointing response from the bank could deal a heavy blow to equities.
The ECB announcement comes a week before the Federal Reserve’s next meeting, where it is tipped to announce a further reduction in borrowing costs following weak jobs figures and signs of slowing in the economy.
However, other, more upbeat readings have kept traders guessing about the Fed’s plans, while reports on consumer prices and retail sales this week will provide more of an idea about the outlook.
Hong Kong was flat while Shanghai slipped 0.1 percent as data showed Chinese producer prices continued to fall in August, hit by falling demand and the US trade war. Consumer prices stabilised with major support coming from a surge in pork prices caused by swine fever that has ravaged the country’s pig industry.
Neil Wilson, chief market analyst at Markets.com, flagged concerns about the impact of the weakness in China.
“The fear is not just that it signals weakness in domestic and overseas demand, but that China is exporting deflation by cutting prices and making it even harder for central banks like the ECB to achieve their inflation goals,” he said in a note.
Sydney dropped 0.5 percent, while Taipei, Wellington, Bangkok and Manila were also well down.
However, Tokyo ended 0.4 percent higher, while Singapore and Seoul were in positive territory.
In early European trade London dipped 0.4 percent, while Paris and Frankfurt each lost 0.2 percent.
There was little major reaction to US Treasury Secretary Steven Mnuchin saying there had been “lots of progress” on trade talks between China and the US.
Dealers are instead waiting for more concrete developments as the two sides prepare for high-level talks in Washington next month.
Regional energy firms were given a leg-up by thanks to gains in oil prices that came after Saudi Arabia’s new energy minister, Prince Abdulaziz bin Salman, said output cuts would benefit all exporting nations.
The remarks suggested he would support reductions to address an oversupplied market and sagging prices.
- Key figures around 0810 GMT -
Tokyo - Nikkei 225: UP 0.4 percent at 21,392.10 (close)
Hong Kong - Hang Seng: FLAT at 26,683.68 (close)
Shanghai - Composite: DOWN 0.1 percent at 3,021.20 (close)
London - FTSE 100: DOWN 0.4 percent at 7,208.83
Pound/dollar: UP at $1.2360 from $1.2342 at 2100 GMT
Euro/pound: DOWN at 89.42 pence from 89.45 pence
Euro/dollar: UP at $1.1051 from $1.1046
Dollar/yen: UP at 107.32 yen from 107.23 yen
West Texas Intermediate: UP 12 cents at $57.97 per barrel
Brent North Sea crude: UP 11 cents at $62.70 per barrel
New York - Dow: UP 0.1 percent at 26,835.51 (close)