Pound hits seven-week high on eve of vital Brexit vote

The Birtish pound has moved up despite worldwide stock doldrums. — Reuters pic
The Birtish pound has moved up despite worldwide stock doldrums. — Reuters pic

LONDON, Jan 14 — The British pound today hit a seven-week high against the dollar as UK Prime Minister Theresa May delivered an upbeat speech on the eve of a key Brexit vote which she is expected to lose, dealers said.

Sterling bounced as high as US$1.2879, a level last seen in late November, after May issued a last-ditch plea for lawmakers to back her European Union divorce deal on Tuesday.

The European single currency dropped to 88.96 pence to the pound, the lowest level since early December.

World stock markets meanwhile buckled as investors seized on poor Chinese economic data which stoked renewed fears of a global slowdown.

"We all have a duty to implement the result of the referendum," May said in an address to factory workers in Stoke, a Brexit-backing city in central England.

The embattled British leader, who is widely expected to lose the House of Commons vote by a considerable margin, said failure to deliver Brexit would be "catastrophic" for British democracy.

'Highly sceptical'

"The pound has moved up... and is now not far from the $1.29 handle," said XTB analyst David Cheetham.

"However, the markets remain highly sceptical as to whether May can get the required support in the Commons tomorrow evening and a heavy defeat would likely see her deal dead in the water."

"Recent developments have seen the consensus make a marked shift away from the probability of a no-deal but there remains a nagging doubt that this is being dismissed out of hand all too readily.

"If traders start to fear that it could realistically happen once more then the pound is vulnerable to a swift swoon lower."

Meanwhile, London's benchmark FTSE 100 stocks index sank 1.0 percent in early afternoon deals, while the Frankfurt and Paris markets shed 0.6 percent and 0.8 percent respectively.

In Asia, Hong Kong stocks spearheaded a sell-off as profit-takers also moved in following a six-day rally.

Reigniting slowdown fears

"Disappointing trade data from China overnight served to reignite fears of a global economic slowdown," said AxiTrader analyst James Hughes.

Data Monday showed China's imports and exports fell last month, signalling that US tariffs are beginning to bite in the world's number two economy.

The customs bureau also said China's trade surplus with the US —a major source of anger for President Donald Trump —widened 17.2 per cent last year, as US companies rushed to buy goods ahead of more tariff hikes.

"European markets have started off the week in somewhat downbeat fashion," said IG analyst Joshua Mahony.

"The release of Chinese trade data has done little to help sentiment around both the Chinese growth story and prospects of talks between the US and China."

With few catalysts to drive buying, equities were ripe for selling after last week's healthy gains, with the US government shutdown -- now in its fourth week and showing no sign of ending soon -- adding a sense of unease.

Wall Street fell Friday, ending a healthy week which was boosted by optimism over China-US trade talks and after the US Federal Reserve hinted it could pause its interest rate hikes. — AFP

Related Articles