Pound surges as post-Brexit transition deal sealed

LONDON: The pound rose yesterday after Britain and the EU reached a landmark deal on a two-year transition after Brexit that will buy businesses and citizens time to adjust to life after the divorce.

World stocks jittered, meanwhile, ahead of a feared US interest rate hike later this week, as concerns of a possible trade war sparked by US President Donald Trump’s announcement on tariffs also weighed.

Rocking the US market were Facebook’s shares plummeting 5.0 percent following reports of a large data breach. “Concerns over the potential for a Trump trade war still seem to be weighing on the minds of investors, with a lack of risk appetite still leading to caution in global stock markets,” FXTM research analyst Lukman Otunuga said. Trump’s taxes on imports worldwide are to come into effect on March 23, with the exception so far of Canada and Mexico, which have won exemptions from the US. EU Trade Commissioner Cecilia Malmstroem is heading to Washington to seek a similar exemption after the bloc threatened to hit flagship US products including peanut butter, orange juice and bourbon whiskey with counter measures.

The pound found strength in a deal reached yesterday between Britain and the EU on a transition period between March 29, 2019 and December 31, 2020. Crucially, the transition will give Britain and Europe more time to agree on a trade deal. Weighed down by the stronger currency the London FTSE 100 benchmark underperformed its European peers as a strong pound stands to hurt exporters.

Stock markets elsewhere dropped because of trade war fears, and the tariffs are set to overshadow the twoday meeting of the world’s richest 20 nations in Buenos Aires, beginning on Monday.

‘Rocky start’

“It’s been a rocky start to trading at the start of the week, as the prospect of a trade war becomes ever more real,” said OANDA analyst Craig Erlam. “Tariffs are likely to be the main topic of conversation at the G20 meeting.” Sentiment was cautious before interest rate decisions this week from both the US Federal Reserve and the Bank of England, on Wednesday and Thursday respectively. —AFP