UK PM May's no-Brexit speech sends pound to 2-month high
The pound also saw support from indications to a possible delay on the Brexit date.
Markets reacted positively on Monday night as investors took heed from United Kingdom (UK) prime minister Theresa May’s warning that the Parliament is more likely to block Brexit from happening than to allow the country to leave the European Union without a deal as a signal that a disorderly Brexit is unlikely to take place.
Mrs May gave the speech to factory workers at an unnamed location in Stoke-on-Trent city, England, in a last-ditch attempt to rally support as the UK parliament votes on the deal on Tuesday.
As of 1.42am coordinated universal time (UTC), the pound was at a high of US$1.2912, the highest since November 15th, 2018’s US$1.2986. Speculation on the Brexit deal saw the pound rallying to US$1.2879 on Monday night, up 0.3% within the day.
The pound also saw support from indications to a possible delay on the Brexit date. EU officials had said that they were prepared to push back Article 50 and the formal Brexit date of March 29 until at least July.
The pound rose for the fourth consecutive week in the black for last week, upon news on the a possible Brexit delay and hopes for a delay saw the GBP/USD exchange rate surging by over a cent last week.
Uncertain Brexit hinges on the UK parliament’s decision
The short-term relief is unlikely to sustain for the pound, given the uncertainties to how Brexit will pan out: whether there would be a last-minute deal, a no-deal exit, a new referendum, or would the UK remain in the bloc, remains to be seen.
UK Conservative Party politician Gareth Johnson joined the string of resignations from government officials who opposed Mrs May’s deal, as he announced his resignation from the UK government in under 24 hours from Tuesday’s Brexit vote. Mr Johnson said it was clear to him that no significant change would be made to the agreement before the meaningful vote, stating that he previously had hoped that there would be changes.
However, markets are banking on the unlikely scenario of a hard Brexit, a situation which would see the country crashing out of the bloc without a trade deal in place. The optimism on that stance has helped ease on Sterling volatility.
US dollar weakness helped the pound draw gains
The recent controversy surrounding United States’ (US) longest government shutdown in history had also caused the greenback to face weakness, supporting the pound through the currency exchange.
Trouble continues to brew in the US, and investors have been predicting for Wall Street to weaken in the months to come. At 3.09am Eastern Time on Monday, Dow futures were down by 192 points, projecting a negative open of 237.95 points. S&P 500 and Nasdaq futures were also lower, down by 20.50 points and 66.50 points, respectively.
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