Pound dips as Brexit saga drags but hopes for deal lend support

STERLING fell on Monday after members of Parliament 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 EU for another Brexit delay, hoping to avoid crashing out of the bloc on October 31 with no agreement in place.

Johnson reluctantly agreed, although the EU is yet to respond to the request and Britain’s conservative government insists it is still committed to exiting by the month’s end.

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.

The pound – which last week hit five-month highs on optimism for a deal – dropped against the dollar and the euro, but Stephen Innes, Asia-Pacific market strategist at AxiTrader, said: “The fact Sterling has proven surprisingly resilient . . . buttresses well for risk sentiment.”

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 foreign exchange st rategist at National Austra lia 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 equit y markets mostly rose but there was litt le major movement in reaction to China’s top trade negotiator Liu He say ing at the weekend that Beijing and Washington had made “substa ntia l progress” towards wrapping up a partia l 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 per cent against the dollar.

And Brett Ewing, chief market st rategist at First Frank lin Financia l Ser v ices, told Bloomberg TV: “It would be significant i f they can get a phase one deal signed before Thanksgiv ing – t he probabilit y of t hat is probably a litt le bit over 60 per cent right now.

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

Hong Kong closed 0.1 per cent up and Tokyo 0.3 per cent higher, with Singapore climbing 0.8 per cent and Seoul up 0.2 per cent. Taipei and Jakarta also rose.

But Shanghai rose 0.1 per cent, while Manila, Bangkok and Wellington were also in the red. The Cambodia Securities Exchange index fell 2.15 per cent.

In early European trade, London, Paris and Frankfurt were all down.