Daily Brexit update Sterling nods at sketchy talk

Daily Brexit update: Sterling nods at sketchy talk

Theresa May says ‘no’, but some senior ministers have said ‘it’s increasingly likely’. The talk of the day is that Brexit could be delayed. London’s Evening Standard newspaper cited anonymous cabinet members suggesting the long-scheduled 29^th March date on which Britain is set leave the European Union may no longer apply. The reason, according to the paper: a backlog of legislation has built to such an extent that if the withdrawal bill is defeated, as looks likely, the resulting snarl-up of process would leave little time to get the bills through Parliament necessary for an orderly exit.

The accuracy of the reports is impossible to judge at this stage. It is also unclear whether a delay would be legally possible. Article 50 was invoked on 29^th March 2017 and cannot itself be revoked by the applicant – the UK. Whether the act of EU withdrawal, can be renegotiated however, is less clear cut. Taking back a decision to leave was the subject of high-level EU legal discussions late last year. The tentative conclusion was that The Lisbon Treaty probably doesn’t forbid a country from withdrawing its application to leave.

But it’s not the intent to leave that’s in question on Friday, according to reports. At least not yet. And only the European Council can provide an extension of the ‘negotiation period’, by unanimous agreement. So, the rationale of those supposedly seeking a delayed Brexit seems tautological, quite like a pretext, and not particularly realistic.

Still, there may now be three broad inputs into the market’s next reaction: the outcome of Tuesday’s parliamentary vote; what the government does as a consequence; and any further moves towards a delayed exit date.

How this affects our Brexit Top 10 markets:

GBP/USD: Sterling against the dollar extended the day’s gains to $1.2866, the best since 23^rd November. This month’s range so far is intact with nearest key support at almost $1.28 dead.

GBP/JPY: A big swoosh by sterling versus its most demanding currency, yet still long-standing psychological forces resist ¥140, near ¥139.91, where an aggressive sell-off to two-year lows was triggered in December.

EUR/USD: The most abstracted market relative to Friday’s talk. Partly why the rate continued its slide from $1.1570 on Wednesday to $1.1470 at last look, down 0.3% on the session.

EUR/GBP: Sterling gained less emphatically against the euro, pulling the pair down to an 0.8919 low, about three quarters to the bottom of its monthly range.

UK 100: The ease of the pound’s advance was enough to spook blue-chip equity investors, pushing the FTSE 100 off a mild gain into a 0.4% loss by close. More sterling-friendly mid-cap shares took the FTSE 250 up 0.6%, one of the sturdier performances in a less sure-footed European session.

Germany 30: A more flaccid day for global markets left the DAX down 0.3%.

Lloyds: The largest domestic bank fell, though less than the market, losing 0.1%. That’s a sceptical investor reaction.

Barclays: Barclays dropped 1.3% tracking a softening Wall Street session.

Shell: Shares in global multinationals are ending the week lower. Oil shares are also pressured by a slump in crude prices which have also run up sharply since early January. Shell fell 1.2%

BP: The smaller oil major also lost about 1%

Join market analyst Fiona Cincotta as she looks at how the vote could unfold and the potential market impact. Register now: cityindex.co.uk/market-outlook…