Eurozone gloom and Brexit deal hope help the pound rebound

THE pound had its best week versus the euro since early January, as hopes that a no-deal Brexit might be prevented and downbeat news from the eurozone combined to lift the currency.

Sterling mounted a steady comeback against the common currency amid discussions between opposition parties over calling a vote of noconfidence to oust Prime Minister Boris Johnson and delaying Britain’s exit from the European Union.

Jeremy Corbyn called for other party leaders to join him in forming a “caretaker” government that would go to Brussels and request the UK’S exit date – currently set for Oct 31 – be pushed back. He was rebuffed by the Liberal Democrats, whose leader Jo Swinson instead threw her party’s backing behind a temporary government led by grandees Ken Clarke and Harriet Harman.

Sterling had been in several weeks of decline, which sped up sharply after Mr Johnson entered No10. He has called Britain’s exit date a “do or die” deadline.

The pound, which also rose against the dollar, was aided by gloom on the continent, with German data this week showing that Europe’s biggest economy shrank in the second quarter.

Germany’s contraction prompted further discussion of how the European Central Bank might intervene to stimulate the eurozone. The sense of a coming shift was compounded by a report in German periodical Der Spiegel that said the country might budget for a deficit if its economic problems continue.

Tom Salmon, an analyst at spread-betting platform Spreadex, said the pound’s volatility was likely to continue, given low levels of liquidity in the summer market and ongoing political uncertainty.

“You’re going to have swings up until September, Mr Salmon said. “The question now is traders’ view of how successful that will be.”

He said markets would continue “moving on the different rhetoric coming out of both camps”, as well as reacting to ongoing shifts in the trade war between the US and China, and economic news from the eurozone.

“I think you’re going to have different stories taking different prominence at different times,” Mr Salmon added. “In the past, you would have one particular currency in focus that seemed to be weaker. Now, there seem to be pressures weighing down most of them.”

Sterling’s rise was further bad news for the FTSE 100, which has been on a losing streak for the last three weeks. The exporter-heavy blue-chip index tends to suffer from a strong pound, which raises the cost of overseas selling.

The FTSE 100 edged back from a six-month low on Friday, closing up 0.71pc, as fresh trade war tensions added to fears of an impending US recession prompted by a bond yield curve flip on Wednesday.

Broadcaster ITV and supermarket giant

Sainsbury’s led the climbers. Fresnillo was the biggest faller, with the miner pulled down by a slip in the price of gold. On the mid-cap FTSE 250, beleaguered landlord Intu

Properties continued to sink. Both of the UK’S top indices opened late after a software glitch.