The British pound and the London stock market recovered yesterday ahead of parliament’s vote on whether to back a “no deal” Brexit.
Sterling and London share prices had taken a brief knock after MPs on Tuesday rejected for a second time a Brexit withdrawal deal negotiated by Prime Minister Theresa May, despite her obtaining last-minute assurances from the EU.
But in afternoon trading yesterday, London’s benchmark FTSE 100 index added 0.3 per cent while the pound rebounded versus the dollar and euro.
“The pound has been the main area of volatility when reflecting Brexit developments, with the FTSE 100 remaining somewhat stable despite the constant shifts,” said Joshua Mahony, senior market analyst at IG trading group.
“Make no mistake, pound’s rally this morning is markets either sniffing an opportunity for a second referendum or a deal passing," said Viraj Patel, a foreign currency and macroeconomics strategist at Arkera, in a tweet.
British MPs was yesterday scheduled to vote on whether the UK should leave the European Union without a deal in just over two weeks, after overwhelmingly rejecting the country’s draft Brexit divorce agreement with Brussels.
The House of Commons is expected to vote against a no deal Brexit, although this could still happen on March 29 anyway unless the British Parliament can agree on what should happen instead.
If a no-deal Brexit is rejected, MPs will vote today on whether to seek an extension to the departure process that would conclude its 46-year EU membership.
Both the pound and the FTSE held up despite Britain’s finance minister Philip Hammond slashing the forecast for economic growth this year over Brexit uncertainty.
The UK economy is forecast to grow by 1.2 per cent this year, down on the government's prediction of 1.6 per cent in October, Mr Hammond said.
Asian indices closed lower, eurozone stock markets traded mostly higher, and Wall Street stocks opened to the upside.
Briefing.com analyst Patrick O’Hare noted that the US stock market has been acting if it doesn't have a care in the world.
“It could care less that the UK’s Brexit effort is a mess. It could care less that Boeing is dealing with a PR nightmare as multiple countries have grounded the 737 MAX,” he said, adding investors also appeared to be unfazed that earnings estimates for the first quarter are declining and global growth slowing down.
Mr O’Hare said that investors appears to be reassured by assurances from central banks that policy interest rates aren't going up anytime soon, which is supportive for stocks.
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