Brexit turmoil hammers pound but stocks hold steady | Fin24
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Brexit turmoil hammers pound but stocks hold steady

Nov 15 2018 17:43

London - The pound dived Thursday as a string of British government resignations appeared to put a draft Brexit deal in serious jeopardy, dealers said.

The UK currency was pummelled as ministers, including Brexit secretary Dominic Raab, quit in protest against the draft EU exit deal, sparking concern that Prime Minister Theresa May could face a no-confidence vote.

"This departure (of Raab) could put at risk the Brexit deal and traders are selling the British currency due to growing uncertainty about the future of the UK," said ActivTrades analyst Carlo Alberto De Casa.

The pound plunged more than 1.5% to a one-month low at $1.2777, while the euro jumped to a two-week peak at 88.52 pence.

"The performance of the pound seems to perfectly reflect the mood in parliament and everywhere else right now. Even the weather is grey and gloomy," Oanda analyst Craig Erlam told AFP.

May had been preparing to sell her Brexit deal to parliament, boosted by news that Europe is preparing a rapid summit to sign off on the agreement.

However, her efforts unravelled spectacularly as Raab resigned along with work and pensions secretary Esther McVey and junior Northern Ireland minister Shailesh Vara.

'Dead duck'

"The pound is under heavy pressure... as the UK-EU deal begins to look like a dead duck," noted IG analyst Chris Beauchamp.

"As the steady drip of resignations hits the government, the UK's deal with the EU appears to be dead in the water already."

The British currency was hit also by news that retail sales slid by 0.5 percent in October compared with September.

However, London's FTSE 100 index of major companies edged ahead on the weaker pound, which boosts London-listed multinationals whose earnings abroad are converted back into sterling.

"The FTSE has long had an inverse relationship with the pound, most notably in the aftermath of Brexit, due to the significant proportion of profits that are generated abroad by those within it," said Erlam,

Nevertheless, Europe's other major stock markets languished in the red, amid uncertainty surrounding Brexit and Italy's fiscal troubles.

Asian equities mostly rose Thursday, with Hong Kong and Shanghai rallying on hopes for an easing of the China-US trade war, while energy firms also enjoyed a much-needed bounce as oil prices stabilised.

Elsewhere, bitcoin extend a sharp descent to stand around $5 400.

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