Pound shrugs off Johnson’s latest Brexit setback

TOKYO: Sterling fell modestly as trading resumed yesterday following British Prime Minister Boris Johnson’s latest failure to break the Brexit deadlock, with forex markets shrugging off a weekend of drama in the British parliament. The currency was down 0.55 percent to $1.2913 at around 0000GMT, holding relatively steady for a currency that has been on a rollercoaster over the past month. “The fact Sterling has proven surprisingly resilient... buttresses well for risk sentiment,” wrote Stephen Innes, Asia Pacific market strategist at AxiTrader, in a commentary. All eyes were on the pound after the House of Commons sat on Saturday to consider Johnson’s EU divorce deal in a vote that was seen as a potential turning point in the long-running Brexit saga. 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 prevent the country 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 month’s end.

‘Details are what matter’

It meant that instead of decisive developments over the weekend, the market was still waiting to see how the situation would play out, 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.” 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. “Based on commentary overnight, there seems to be a fair bit of support rising for Boris Johnson to get the deal done, but details are what matter,” he said. “There’s still the potential for a confirmatory vote and the potential for further amendments.” He said sterling had the potential to rise if Foreign Secretary Dominic Raab’s claim that the UK government had the numbers to push through Johnson’s deal proved correct. “But we’re not yet certain that the government has got the vote, so that points to a little bit of cautiousness in terms of the pound facing a little bit of uncertainty in coming days,” Catril said. —AFP