Sterling rebounds on data surprise, Brexit hopes

The British currency had a rollercoaster week during which it plunged to three-year lows before rebounding strongly as lawmakers voted to block a no-deal Brexit. (AFP)
Updated 09 September 2019

Sterling rebounds on data surprise, Brexit hopes

  • Against the US dollar, the pound gained 0.25 percent to $1.2321 after weakening 0.2 percent to $1.2233 earlier
  • The Daily Telegraph reported British PM Boris Johnson has prepared plans to legally stop any Brexit extension

LONDON: Sterling rebounded from early lows on Monday and headed toward a five-week high on Monday as surprisingly strong data and growing optimism that Britain will not crash out of the European Union without a deal boosted demand for the British currency. British Prime Minister Boris Johnson will try for a second time on Monday to call a snap parliamentary election, but is set to be thwarted once more by opposition lawmakers who want to ensure he cannot take Britain out of the EU without a divorce agreement in place.
“The threat of a no-deal Brexit has somewhat receded but has not gone away completely, which is reflected around current levels,” said Esther Maria Reichelt, a strategist at Commerzbank.
Against the dollar, the pound gained 0.25 percent to $1.2321 after weakening 0.2 percent to $1.2233 earlier. It hit a one-month of $1.2353 last week.
Versus the euro, it also gained 0.25 percent to 89.48 pence.
Johnson last week failed to win enough support from lawmakers to call an early election and parliament also approved a bill which aims to block a no-deal Brexit at the end of October. That would force Johnson to seek a delay to Brexit.
Sterling had a rollercoaster week during which it plunged to three-year lows before rebounding strongly as lawmakers voted to block a no-deal Brexit.
In a note published late on Friday, strategists at Goldman Sachs raised the probability of a Brexit deal to 55 percent from 45 percent earlier and cut the likelihood of a “no deal” to 20 percent from 25 percent previously.
However, there is some uncertainty on whether the EU will allow an extension, while the Daily Telegraph reported Johnson has prepared plans to legally stop any Brexit extension.
The uncertainty prompted hedge funds to unwind some of their negative bets against the British currency.
Speculative short positions on the pound slipped in the latest week to 84,959, according to data from the US Commodity Futures Trading Commission.
The pound also received a rare boost from surprisingly strong economic data.
Economic output in July alone was 0.3 percent higher than in June, the Office for National Statistics said, marking the biggest rise since January and topping all forecasts in a Reuters poll of economists that had pointed to a 0.1 percent increase.


Oil up on slowing pace of coronavirus, Venezuela sanctions

Updated 58 min 19 sec ago

Oil up on slowing pace of coronavirus, Venezuela sanctions

  • Financial analysts say epidemic is likely to deal a ‘short-term blow’ to global economy

LONDON: Benchmark Brent oil prices rose for a seventh consecutive day after demand worries eased with a slowing of new coronavirus cases in China and supply was curtailed by a US move to cut more Venezuelan crude from the market.

Brent was up 71 cents at $58.46 a barrel at 1510 GMT. The global benchmark has risen nearly 10 percent since falling last week to its lowest this year. US oil was up 53 cents at $52.58 a barrel.

“Those in doubt of the economic impact from the virus should take heed from Apple’s surprise sales warning ... Put simply, this is the surest sign yet of the coronavirus fallout on the global economy,” said PVM analysts in a note.

S&P Global Ratings said it expected coronavirus would deliver a “short-term blow” to economic growth in China in the first quarter, echoing findings by the International Energy Agency.

Official data showed new cases in China fell for a second straight day, although the World Health Organization said there was not enough data to know if the epidemic was being contained.

The oil market price structure is also showing signs that prompt demand for oil is picking up, as the front-month Brent futures market is moving deeper into backwardation, when near-term prices are higher than later-dated prices.

This week, oil prices were also buoyed by a US decision to blacklist a trading subsidiary of Russia’s Rosneft, which President Donald Trump’s administration said provided a financial lifeline to Venezuela’s government.

Hopes that the Organization of the Petroleum Exporting Countries (OPEC) and allied producers would deepen supply cuts also supported prices.

The grouping, known as OPEC+, has been withholding supply to support prices and meets next month to decide a response to the downturn in demand resulting from the coronavirus epidemic.

But in the US, which is not party to any supply cut agreements, oil production has been rising. US shale production is expected to rise to a record 9.2 million barrels a day next month, the Energy Information Administration said.