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Sterling slips from 5-month high on Brexit delay jitters

Sterling slips from 5-month high on Brexit delay jitters

Sterling fell over half a percent against the dollar this morning, slipping from five-month highs after the British parliament delayed a crucial vote on a Brexit withdrawal agreement.

The move derailed Prime Minister Boris Johnson’s plan for a decision on his withdrawal deal.

But the pound held the bulk of its recent rally on confidence that a disorderly exit from the European Union would be avoided.

In Asian trade, the pound fell 0.61% to $1.2910, having hit a five-month peak of $1.2990 on Friday and closing the week just below the $1.30 mark.

This marked a 6.5% surge since Johnson struck an EU divorce deal on October 10.

UK politicians on Saturday voted to withhold a decision on Johnson’s deal, a move that forced him to seek from the EU a third postponement of Britain’s departure from the bloc.

Britain’s exit had been envisaged for October 31.

But Johnson added another note saying he was opposed to an extension and British government minister Michael Gove said yesterday that Brexit will happen by October 31 as the government seeks to get the Brexit bill through parliament.

Analysts said market focus will turn to this week’s vote on Johnson’s deal.

Foreign Secretary Dominic Raab told the BBC overnight that he was confident enough lawmakers would back the deal this week.

“The weekend’s events, if anything, have further reduced the risk of disorderly exit,” said Adam Cole, chief currency strategist at RBC Capital Markets in London.

“If there is a knee-jerk negative reaction in the pound as we emerge from the weekend with a greater overhang of uncertainty than hoped and some of the long positions are unwound, it should be faded soon,” he added.

The European Union will play for time rather than rush to decide on London’s reluctant request to delay Brexit again, diplomats said yesterday.

While weary of the Brexit process, EU leaders are keen to avoid a disorderly exit and are unlikely to reject the request. They hope the deal can eventually be approved in London.

Goldman Sachs said it had lowered the probability of a no-deal Brexit to 5% from 10% and maintained its baseline view that the UK will leave the EU on October 31.

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Pound falls as doubts grow over chances of last-minute Brexit deal

Pound falls as doubts grow over chances of last-minute Brexit deal

Sterling fell in early London trading today as investors grow increasingly concerned that Britain and the European Union were no closer to agreeing a Brexit withdrawal deal.

British lawmakers have passed a law requiring Prime Minister Boris Johnson to seek a delay to Brexit if the UK cannot agree a withdrawal deal by October 19.

But a report in the Daily Telegraph said Johnson intended to challenge that law, the Benn Act, in the Supreme Court.

Jane Foley, an analyst for Rabobank, said this week and next would be another “roller coaster” for the pound as it became clearer whether Britain and the EU would reach a deal and whether Johnson would challenge the Benn Act.

At current levels, the pound is pricing in a delay to Brexit beyond the October 31 level, and a degree of hope for a last-minute agreement with Brussels, Foley said.

“Before the EU summit there will always be a modicum of hope that there will be a deal,” Jane Foley said.

Boris Johnson has repeatedly vowed to take Britain out of EU on October 31 – raising the prospect that he will move further to reach an agreement than many think, or that he intends to push back against parliamentary efforts to block a no-deal Brexit.

The prime minister urged French President Emanuel Macron on Sunday to “push forward” to secure a Brexit deal and told him the EU should not be lured into the mistaken belief that the UK would stay in the EU after October 31.

Britain’s latest Brexit proposal has been rebuffed in Brussels.

Sterling traded 0.2% lower at $1.2311 this morning, while it was down 0.2% against the euro at 89.195 pence.

A series of disappointing economic data over the past week has added to worries about the British economy and the impact of Brexit-related political uncertainty.

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Sterling jumps to 8 day high

Sterling jumps to 8 day high

Sterling jumped to an eight-day high after the head of a group of euro sceptic lawmakers in Prime Minister Boris Johnson’s Conservative Party said the government’s latest Brexit proposals offered the possibility of a “tolerable deal”.

A weaker dollar on a weaker-than-expected US non-manufacturing purchasing managers’ index inflated the rise, sending the pound above $1.24.

“There does seem to be maybe some reason to be optimistic in terms of the Brexit plan,” said Jane Foley, senior forex strategist at Rabobank.

“We know this is not a done deal, but it hasn’t yet been written off” and this is what is exciting market participants at the moment, Foley said.

By 1430 GMT sterling was up 0.9% at $1.2410, an eight-day high. Against the euro, the pound was up 0.6% at 88.64 pence.

Traders remained unsure whether Johnson’s proposal to replace the Irish border “backstop” was going to morph into a final Brexit divorce agreement due to mixed messages coming from both sides.

“For sterling, as it’s often the case these days, the outlook is binary,” said Foley.

The so-called backstop is an insurance policy to prevent the return of a hard border on the island of Ireland, which has become the biggest hurdle to securing an agreement with Brussels.

The British government on Wednesday proposed an all-island regulatory zone in Ireland to cover all goods, replacing the so-called backstop arrangement, and was waiting for an official response from its European counterparts.

But a European Parliament Brexit group believes the new proposals “do not represent a basis for an agreement”, according to the draft of a statement seen by Reuters ahead of release later in the day. A senior European Union official said on Thursday that Johnson’s last-ditch Brexit proposal “can’t fly”.

Analysts say the market is largely sceptical that the EU will agree to Britain’s latest offer to avoid a no-deal departure from the European Union on October 31. But with hedge funds covering some of their short bets against the pound, the currency has held at current levels.

Just 28 days before the United Kingdom is due to leave the EU, both sides are positioning themselves for a delay or a disorderly no-deal Brexit. Johnson says he wants a deal but insists there can be no delay beyond the end of the month.

The cool reception from Brussels to Johnson’s proposal indicates just how far apart the two sides are on the first departure of a sovereign state from the EU, which was forged from Europe’s ruins after World War Two.

“It would be one monumental climb-down by the EU to go from a customs union backstop for either the whole of the UK or Northern Ireland with no time limit to a plan that does not entail a customs union and requires some form of border checks that has a potential rolling four-year time-limit attached,” MUFG analysts said in a note.

“But for now, the hope of some breakthrough may continue to provide GBP support, but we don’t see it lasting… We see building risks to the downside and expect the September lows to be tested pretty quickly in the coming days/weeks,” they said, referring to the $1.1959 three-year low hit in early September.

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Sterling unfazed by weak economic data, as Britain waits for EU Brexit response

Sterling unfazed by weak economic data, as Britain waits for EU Brexit response

Sterling was little moved today despite a surprise contraction in the services sector as investors waited to receive a formal European Union response to Britain’s latest Brexit offer.

The pound has found little direction in recent days, and is back where it was at the start of the week.

Britain’s economy appears to have tipped into recession, according to the latest IHS Markit/CIPS services Purchasing Managers’ Index.

The index fell by more than any economist predicted in a Reuters poll, tumbling to a six-month low of 49.5, below the 50 level that divides growth from contraction.

Despite this however, the pound managed a small rise and was last up 0.1% at $1.2315 while against the euro it was up 0.1% at 89 pence.

Analysts say the market is largely sceptical that the EU will agree to Britain’s latest offer to avoid a no-deal departure from the European Union on October 31.

But with hedge funds covering some of their short bets against the pound, the currency has held at current levels.

A European Parliament Brexit group believes the new proposals “do not represent a basis for an agreement”, according to the draft of a statement seen by Reuters ahead of release later in the day.

Should the EU reject Britain’s Brexit proposal, attention will turn to the “Benn bill” that compels the government by October 19 to seek an extension to Brexit until January 31, 2020, if no deal is reached during an EU summit on October 17 and 18.

But British Prime Minister Boris Johnson again told his Conservative Party at their annual conference yesterday that Britain would leave the EU on October 31 with or without a deal.

Sterling had enjoyed a strong rally in late September as investors bet that lawmakers would be able to stop a no-deal exit.

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Sterling dips to one-month lows as Brexit nerves hit

Sterling dips to one-month lows as Brexit nerves hit

The British pound extended losses today, plunging through technical support levels to a one-month low against the dollar as traders became increasingly nervous about Britain crashing out of the European Union at the end of the month.

Broad-based dollar strength also contributed to the falls,analysts said.

With Prime Minister Boris Johnson expected to soon present his proposals for an amended Brexit agreement, investors questioned the likelihood of Brussels finally signing a divorce deal with the United Kingdom.

“There’s no reason (for sterling) to go up unless the EU says yes we can negotiate on this,” said Kenneth Broux,corporate FX strategist at Societe Generale, adding that the pound could fall to $1.20.

This afternoon it was down 0.6% at $1.2228, having briefly dipped to a four-week low of $1.2205. Against the euro,sterling was down 0.7% at 89.21 pence after sliding to a 2-1/2-week low of 89.345 pence.

More than three years after the 2016 Brexit referendum, Britain is heading towards an October 31 departure date without a clear understanding of whether it will leave with a deal,without a deal or even leave by the deadline.

The government’s proposals are expected to include new ideas that remove the contested insurance policy for the Irish border that Britain previously signed up to, but EU officials sounded sceptical about the chances of a breakthrough.

Moreover, Ireland dismissed reported ideas including physical checks on goods at a distance from the border itself.

“The market has seen these kinds of headlines before and then we get a push back, so there is some scepticism about what we will see,” said Jane Foley, senior currency strategist at Rabobank, referring to the expected government proposals for the backstop.

“That leaves sterling in a choppy range and there is plenty of news flow this week,” Foley said.

Broad-based gains for the dollar on renewed evidence of strength in the U.S. economy contributed to the earlier slide in the pound.

Chartists said earlier in the day they were watching the$1.2279 level, the 50-day moving average – a technical indicator that refers to the currency’s average closing price over the past 50 days.

A conclusive breach below that level would open the door to further losses, they said.

The latest UK economic data had little immediate impact on the British currency.

The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index showed the factory sector overall shrank for a fifth month in a row, its longest decline since mid-2009.

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Sterling extends losses as Brexit impasse prevails

Sterling extends losses as Brexit impasse prevails

Sterling fell today for a second day in a row, as investors waited for parliament’s next step to break the Brexit impasse and opposition leaders gathered to discuss tactics.

The European Union’s Brexit negotiator, Michel Barnier, said Britain had yet to provide “legal and operational” proposals for an agreement on exiting the bloc at the October 31 deadline.

The UK Supreme Court dealt Prime Minister Boris Johnson a blow earlier this week when it ruled he had unlawfully suspended parliament.

The ruling reinforced belief that Britain was unlikely to leave the EU without a deal on October 31, but parliament remains split, early elections look inevitable and Johnson remains adamant

Those fears eliminated all sterling’s gains since the Supreme Court ruling, for its biggest one-day fall against the dollar in two weeks.

It had slipped 0.1% to $1.235 this evening, while it was also down 0.1% against the euro at 88.5 pence.

“We don’t know where things will go with Brexit. That’s being manifested in sterling more than any other asset,” said Fahad Kamal, chief market strategist at Kleinwort Hambros.

“What we have done in the face of unknowable political outcomes and daily volatility is to make sure our portfolios can deal with any big moves, big rallies or big falls,” he added.

British opposition Labour leader Jeremy Corbyn will meet other opposition leaders later today, as they discuss how to stop Johnson from quitting the EU on October 31 if he fails to secure a deal with Brussels by October 19.

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Sterling rallies, stocks slip on Supreme Court ruling

Sterling rallies, stocks slip on Supreme Court ruling

Sterling extended gains on Tuesday while euro zone stocks tumbled after Britain’s Supreme Court ruled that British prime minister Boris Johnson had acted unlawfully when he advised Queen Elizabeth to suspend Parliament this month.

The British currency gained as much as 0.4 per cent against the euro to 88.07 pence and up nearly 0.5 per cent versus the dollar to $1.2491. Stocks tumbled however on the back of the stronger pound.

British gilt yields rose following the decision, dragging safe-haven German bond yields higher.

British government bond futures fell to a session low of 133.12, down 60 ticks on the day, while 10-year gilt yields rose 3 basis points on the day to 0.585 per cent.

“While the decision of the UK’s highest court is a big political win for oppositions parties, markets are taking the view it is unlikely to lead to any major Brexit developments before the next big milestone in six days’ time when the EU want to receive the UK’s written proposal for a backstop replacement and beyond that, the EU summit on 17 & 18th October and the law requiring an extension be requested on 19th October,” said Gearoid Keegan, Investec Treasury

London’s blue-chip FTSE 100 hit its day low as sterling rallied after the ruling. A JPMorgan’s index tracking UK stocks that make their revenue at home hit their day highs on the news. – Reuters

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Sterling rebounds on data surprise, Brexit hopes

Sterling rebounds on data surprise, Brexit hopes

Sterling rebounded from early lows today and headed towards a five-week high as surprisingly strong data and growing optimism that Britain will not crash out of the European Union without a deal boosted demand for the British currency.

Against the dollar, the pound gained 0.6% to $1.235 after weakening 0.2% to $1.2233 earlier.

It hit a one-month high of $1.2353 last week.

Compared to the euro, it also gained 0.36% to 89.5 pence.

Boris Johnson last week failed to win enough support from lawmakers to call an early election and parliament also approved a bill which aims to block a no-deal Brexit at the end of October.

That would force Johnson to seek a delay to Brexit.

Sterling had a rollercoaster week during which it plunged to three-year lows before rebounding strongly as lawmakers voted to block a no-deal Brexit.

In a note published last week, strategists at Goldman Sachs raised the probability of a Brexit deal to 55% from 45% earlier and cut the likelihood of a “no deal” to 20% from 25% previously.

However there is some uncertainty on whether the EU will allow an extension, while the Daily Telegraph reported Johnson has prepared plans to legally stop any Brexit extension.

The uncertainty prompted hedge funds to unwind some of their negative bets against the British currency.

The pound also received a rare boost from surprisingly strong economic data.

Economic output in July alone was 0.3% higher than in June, the Office for National Statistics said.

This marked the biggest rise since January and topping all forecasts in a Reuters poll of economists that had pointed to a 0.1% increase.

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Sterling dives as fears of no-deal Brexit grow

Sterling dives as fears of no-deal Brexit grow

Sterling dived as concerns rose that the United Kingdom may be headed for a disruptive no-deal Brexit after Prime Minister Boris Johnson moved to restrict parliamentary time before October 31.

Mr Johnson said he would schedule a Queen’s Speech for October 14 in order to launch new legislation. He denied he was seeking to prevent parliament from obstructing his Brexit plans.

The move limits the amount of parliamentary time available to lawmakers who want to prevent him taking the country out of the EU without an exit deal.

The pound, already trading lower on the day, extended its drop to hit $1.2156, a six-day low, and was last down 0.7% on the day.

Against the euro the British currency also weakened to 91.265 pence, its lowest in nearly a week, trading last down by 0.7% at 90.89 pence.

“For the pound to recover the fall this morning, anti-no deal MPs will have to get their acts together in the first weeks of September,” Jordan Rochester, a strategist at Nomura said, raising the odds of a no deal Brexit to 44% vs 40% earlier.

The latest move from Johnson comes a day after lawmakers who are opposed to a no-deal Brexit met to discuss ways they could use parliamentary procedure to force Johnson to seek a delay to Brexit.

Sterling had rallied in recent days on hopes that Britain’s opposition parties can stop a no-deal Brexit.

On Tuesday, it hit a one-month high against the dollar and the euro.

Johnson has said the UK is leaving the European Union with or without a deal on October 31, and media have previously reported that he wants to suspend parliament to help force through an exit.

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Sterling hits 23-month low overnight

Sterling hits 23-month low overnight

The British pound rose slightly on Tuesday to hold above recent lows although it remained vulnerable as traders still worry that Britain is headed for a no-deal Brexit.

Sterling hit a new 23-month low against the euro overnight, with the losses largely down to strength in the single currency rather than more Brexit-related worries.

The Guardian newspaper reported late on Monday that Brussels diplomats briefed after a meeting with British Prime Minister Boris Johnson’s chief European envoy said it was clear Johnson had no intention of renegotiating the withdrawal agreement.

Johnson has said Britain will leave the European Union on October 31 with or without a deal.

The risk of a no-deal Brexit in October has surged in recent weeks under Johnson, hammering the pound to its lowest in more than two years.

On Tuesday, sterling rose 0.3% against the dollar to $1.2173, away from the 31-month low of $1.2080 hit last week.

Against the euro the pound recovered from a nearly 2-year low of 92.49 pence to touch 92.06 pence, up 0.2% on the day.

“In the run-up to the Brexit deadline at end-October, we expect EUR/GBP to remain volatile and maybe more so than we previously thought likely. Financial markets are taking Boris Johnson’s direct approach literally and, in the run-up to October, this could mean EUR/GBP will drift higher,”

Danske Bank analysts said, predicting euro/sterling could go to 97 pence.

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