Crazy week for UK pound, a Brexit thermometer


London, United Kingdom | AFP | by Kevin TRUBLET

The pound has experienced a chaotic week in reaction to Brexit’s twists and turns, with large swings against rival currencies a daily occurrence.

A picture taken in London on March 12, 2019 shows a man posing in front of a screen showing the Bloomberg display showing the movement of the value of the Pound Sterling against the US Dollar on March 12, 2019 with the graph showing a dip, following the publication of the legal advice on the latest iteration of the Brexit deal. – The British pound tumbled on March 12, 2019 after the government’s top legal advisor cast doubt on Prime Minister Theresa May’s last-gasp changes to her Brexit deal, hours before a vital vote. (Photo by DANIEL SORABJI / AFP)

Over the week the pound has jumped 1.8 percent against the dollar and 1.0 percent versus the euro to trade at around $1.3250 and 1.1700 euros respectively Friday.

The rally illustrates markets’ surprising confidence of there being an eventual smooth EU exit for Britain despite political unrest over sealing the country’s divorce.

In normal times, the pound tends to take its lead from changes in central bank monetary policy and economic indicators.

But for several months now, “Brexit is definitively the biggest” trigger for sterling, Carlo Alberto De Casa, an analyst for ActivTrades, told AFP.

This in turn has made the currency a good indicator of investor opinion regarding Brexit.

Generally, Brexit uncertainty and fears of an even greater slowdown to the UK economy than at present have weighed on the pound — with current values lower than before the June 2016 referendum on leaving the EU.

  • Tuesday erases Monday –
    The pound’s rollercoaster began late on Monday when British Prime Minister Theresa May announced securing “legally binding” guarantees from the EU designed to get the Brexit deal through the UK parliament and avert a chaotic withdrawal.

Almost immediately, the pound shot up 1.0 percent against the dollar — a large movement for currency markets.

Optimism continued into Tuesday morning, with analysts suggesting that May could yet win a parliamentary vote on her deal despite suffering a massive defeat first time around in January.

Related:
Apple Accidentally Reveals Radical New iPhone XS

The “second… vote is no longer a certain defeat for the UK government”, wrote analysts at MUFG.

The hopes were quickly swept away however when nearing midday in London, the government’s chief legal advisor declared that the legal risk of Britain being stuck in EU trade arrangements after Brexit “remains unchanged”.

That triggered a sharp reversal for the pound which promptly erased all gains won over the previous 24 hours.

  • No-deal –
    By Wednesday morning, the pound was back in favour, gradually recovering as parliament prepared for yet another vote — this time on whether to rule out a no-deal Brexit.

By 2030 GMT, sterling rocketed to multi-month highs after MPs voted to reject a no-deal Brexit, prompting May to announce that she would put her EU divorce plan to parliament for a third time in the coming days.

Late Wednesday, the pound hit 1.1803 euros, a level not seen since May 2017 and ended the day 1.6-percent higher versus the European single currency. Against the dollar, sterling had risen 2.0 percent.

Thursday parliament voted massively in favour of asking the EU to delay Brexit. With the outcome viewed as a logical step after the previous day’s no-deal result, the pound showed little reaction.

But sterling is likely to see further swings in the coming days, weeks and even months, depending on the nature of Brexit, with a chaotic divorce still a possibility.

In the case of a no-deal, “we can (expect to) see a huge movement on the pound”, predicted De Casa.

ktr-bcp/jh

© Agence France-Presse


Like it? Share with your friends!

0

What's Your Reaction?

hate hate
0
hate
confused confused
0
confused
fail fail
0
fail
fun fun
0
fun
geeky geeky
0
geeky
love love
0
love
lol lol
0
lol
omg omg
0
omg
win win
0
win

0 Comments

Choose A Format
Personality quiz
Series of questions that intends to reveal something about the personality
Trivia quiz
Series of questions with right and wrong answers that intends to check knowledge
Poll
Voting to make decisions or determine opinions
Story
Formatted Text with Embeds and Visuals
List
The Classic Internet Listicles
Countdown
The Classic Internet Countdowns
Open List
Submit your own item and vote up for the best submission
Ranked List
Upvote or downvote to decide the best list item
Meme
Upload your own images to make custom memes
Video
Youtube, Vimeo or Vine Embeds
Audio
Soundcloud or Mixcloud Embeds
Image
Photo or GIF
Gif
GIF format