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23 May, 2019 00:00 00 AM
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Pound tumbles to four-month lows on Brexit agony

AFP, Hong Kong
Pound tumbles to four-month 
lows on Brexit agony

The pound sank to fresh four-month lows yesterday after British MPs slammed Theresa May's latest plan to pass her Brexit plan, increasing the chances of a no-deal divorce, while Asian markets rose as dealers await the latest China-US developments.

With Wall Street providing a positive lead, regional equities were mostly on the up but analysts warned traders were on edge and any unsavoury headlines could precipitate another sell-off.

The sterling rallied Tuesday after the prime minister unveiled her revised EU divorce deal that included a promise for lawmakers to set a confirmatory referendum on whatever version of Brexit they end up approving.

However, the currency fell as quickly as it had risen as opponents of the original agreement attacked it as nothing more than a rehash.

May called the new proposals this parliament's "last chance" to end a political deadlock but with key MPs led by arch-Brexiters still unmoved, it is likely to fall flat for a fourth time.

Failure to get the deal through parliament will more than likely see May resign and possibly be replaced by a more hardline leader -- most bets are on the controversial Boris Johnson -- who would push for a no-deal exit, a scenario analysts warn could spell economic hardship.

"Politicians from all sides trashed her proposals, leaving the pound mired at four-month lows while the prime minister awaits her end of days," said OANDA senior market analyst Jeffrey Halley.

"A settlement remains as distant as ever."

The pound gave up early small gains against the dollar and resumed its downtrend to wallow around levels last seen in January.

Dealers are keeping a close eye on developments in the China-US trade tussle after the pair swapped tariff hikes and Donald Trump barred Chinese telecoms giant Huawei from the US market and put it on a sales blacklist.

- 'Headline bombs' -

A 90-day reprieve provided a semblance of hope that the row can be resolved and the two economic superpowers will hammer out a trade deal at some point.

But reports emerged that Trump is now considering banning Chinese surveillance camera makers from getting access to US components, in a similar move to that against to Huawei, which could further stoke tensions.

After the New York Times story Hangzhou Hikvision Digital Technology dived 5.5 per cent and Zhejiang Dahua Technology tumbled almost six per cent. Bloomberg News said three other surveillance firms were also being considered for action.

Markets will be "vulnerable to headline bombs", Halley warned.

"Most notably, China has been very, very quiet on its intended retaliatory measures against the US," he added.

"Make no mistake, they've not gone away, and any unexpected announcement by Beijing on that front could turn sentiment very quickly indeed."

Hong Kong edged up 0.2 per cent while Tokyo finished 0.1 per cent higher with Sydney, Seoul, Singapore, Mumbai, Manila and Wellington also on the rise.

But Shanghai and Taipei turned negative.

In early trade London rose 0.4 per cent, while Paris and Frankfurt each lost 0.1 per cent.

Attention is now on the release later in the day of the minutes from the Federal Reserve's most recent policy meeting, with hopes it will provide some idea about the state of the US economy.

Traders will also pore over the report seeking forward guidance on its plans for interest rates as concerns about a growth slowdown begin to set in globally, while some observers suggest the bank could even be contemplating a cut.

Oil prices dipped after data pointed to a surprise increase in US inventories, while Washington appeared to tone down its rhetoric from recent weeks with Iran, saying it did not want a war with the Islamic republic.

 

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Editor : M. Shamsur Rahman

Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

Editor : M. Shamsur Rahman
Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

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