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 prices surge after attacks hit Saudi output

Updated 16 September 2019

Oil prices surge after attacks hit Saudi output

  • The Houthi attacks hit two Aramco sites and effectively shut down six percent of the global oil supply
  • President Donald Trump said Sunday the US was ‘locked and loaded’ to respond to the attacks

HONG KONG: Oil prices saw a record surge Monday after attacks on two Saudi facilities slashed output in the world’s top producer by half, fueling fresh geopolitical fears as Donald Trump blamed Iran and raised the possibility of a military strike on the country.
Brent futures surged $12 in the first few minutes of business — the most in dollar terms since they were launched in 1988 and representing a jump of nearly 20 percent — while WTI jumped more than $8, or 15 percent.
Both contracts pared the gains but were both still more than 10 percent up.
The attack by Tehran-backed Houthi militia in neighboring Yemen, where a Saudi-led coalition is bogged down in a five-year war, hit two sites owned by state-run giant Aramco and effectively shut down six percent of the global oil supply.
Trump said Sunday the US was “locked and loaded” to respond to the attack, while Secretary of State Mike Pompeo said: “The United States will work with our partners and allies to ensure that energy markets remain well supplied and Iran is held accountable for its aggression.”
Tehran denies the accusations but the news revived fears of a conflict in the tinderbox Middle East after a series of attacks on oil tankers earlier this year that were also blamed on Iran.
“Tensions in the Middle East are rising quickly, meaning this story will continue to reverberate this week even after the knee-jerk panic in oil markets this morning,” said Jeffrey Halley, senior market analyst at OANDA.
Trump authorized the release of US supplies from its Strategic Petroleum Reserve, while Aramco said more than half of the five million barrels of production lost will be restored by tomorrow.
But the strikes raise concerns about the security of supplies from the world’s biggest producer.
Oil prices had dropped last week after news that Trump had fired his anti-Iran hawkish national security adviser John Bolton, which was seen as paving the way for an easing of tensions in the region.
“One thing we can say with confidence is that if part of the reason for last week’s fall in oil and improvement in geopolitical risk sentiment was the news of John Bolton’s sacking ... and thoughts this was a precursor to some form of rapprochement between Trump and Iran, then it is no longer valid,” said Ray Attrill at National Australia Bank.