Pound rises versus dollar on May’s Brexit gamble

London:  Global stock markets rose Wednesday on optimism over US-China trade talks while the pound ticked upwards amid hopes that British Prime Minister Theresa May’s new political gamble could avert a messy “no deal” Brexit.

Sterling won a boost after Conservative leader May declared late Tuesday that she would look for another Brexit delay and softened her position ahead of Britain’s scheduled departure from the European Union next week.

After her deal and many other options failed to win the British parliament’s approval, May changed tack by meeting with Britain’s opposition Labour Party leader Jeremy Corbyn to find a compromise on Wednesday.

“The announcement was win-win for the pound,” Oanda analyst Craig Erlam told AFP.

“Not only did May re-affirm her opposition to no deal, she’s technically opened the door to a softer Brexit. I say technically because a lot now has to happen for that to be delivered, including the Conservatives and Labour working together towards an uncharacteristic compromise.”

However, he added: “If this fails, I struggle to see how she recovers; it very much feels like a last-ditch, desperate gamble.”

‘Last throw of dice’ –

AxiTrader analyst James Hughes meanwhile questioned why May had waited this long to hold discussions with Corbyn.

“This feels very much like the last throw of the dice, with the argument being that cross-party talks should have been the first throw of the dice,” Hughes told AFP.

“The deadlock, political infighting and MPs’ inability to make a decision has led to both the process and the country to a certain degree becoming a laughing stock.

“Continuous votes on outcomes that the majority know will be rejected by the EU anyway are wasting time, and it’s only now that we are taking the prospect of no deal seriously enough.”

However, sterling’s gains were capped Wednesday by a gloomy survey showing that Britain’s vital services sector shrank in March for the first time in almost three years, with activity slammed by Brexit turmoil and flat economic growth.

‘Glass-is-half-full mentality’

Wall Street was higher at midday trading, despite new data showing that hiring in the US private sector slowed for the second month in a row in March — hitting its slowest pace in 18 months.

European and Asian stock markets also advanced Wednesday as a report said China and the US were closing in on a deal to end their long-running trade row.

Frankfurt’s DAX 30 index in particular charged forward, up more than 1.7 percent at the close — its highest level in nearly six months.

Investor optimism had been given an extra boost by a report in the Financial Times saying Beijing and Washington were on course for a historic agreement.

Expectations that the world’s top two economies will eventually sign a deal has been a key driver of a global equities rally this year, and the FT article adds to the general sense of hope.

“Clearly, the stock market continues to look at those negotiations with a glass-is-half-full mentality,” said Briefing.com analyst Patrick O’Hare.

The report comes after better-than-expected factory data out of China and the US that eased worries about growth in the global economy, while a dovish turn from central banks has also provided support.

Key figures around 1540 GMT

Pound/dollar: UP at $1.3150 from $1.3128 at 2100 GMT on Tuesday

Euro/pound: UP at 85.44 pence from 85.31 pence

Euro/dollar: UP at $1.1235 from $1.1204

Dollar/yen: UP at 111.47 yen from 111.32 yen

London – FTSE 100: UP 0.4 at 7,418.28 points

Frankfurt – DAX 30: UP 1.7 percent at 11,954.40

Paris – CAC 40: UP 0.8 percent at 5,468.91

EURO STOXX 50: UP 1.2 percent at 3,435.56

Tokyo – Nikkei 225: UP 1.0 percent at 21,713.21 (close)

Hong Kong – Hang Seng: UP 1.2 percent at 29,986.39 (close)

Shanghai – Composite: UP 1.2 percent at 3,216.30 (close)

New York – Dow: UP 0.1 percent at 26,215.70

Oil – Brent Crude: DOWN 25 cents at $69.12 per barrel

Oil – West Texas Intermediate: DOWN 40 cents at $62.18

Source from: The Peninsula