Daily Brexit update: Anti-climax takes sterling back to Monday

Sterling has meandered higher and then a little lower after Prime Minister Theresa May's confidence vote win

Daily Brexit update: Anti-climax takes sterling back to Monday

Prime Minister Theresa May’s relief at winning the confidence motion was anticipated by sterling well before the news was announced last night. Consequently, the only visible immediate reaction was a sharp whipsaw of some 80 pips in sterling traded against the dollar. It lasted around 10 minutes. Since then, the rate has meandered higher and then a little lower. This partly reflects a lack of further developments expected before the Brexit bill’s likely return to the commons for a vote. That will happen next month, no later than the 21st, according to Downing Street’s clarification on Thursday afternoon. Deep underlying uncertainties inherent in the flawed deal from the start, remain. Just now, the pound was up just 60 pips from where it was when Downing Street decided to gamble further with the government’s credibility. Mayhem aside, perceptions do not appear to have changed that much.

How this affects our Brexit Top 10 markets:

GBP/USD: As such, cable’s new extended range (to the downside) now encompasses Wednesday’s new 20-month low of $1.2475. The presumed top was the lower end of its previous 3-week span at $1.2723. With the spot struggling at last look, likely new resistance remains out of reach on Thursday. On the downside, late-Asia swing lows around $1.2608 are the immediate objective.

GBP/JPY: One of the currencies against which sterling achieves a second consecutive day of gains is the yen. This reveals that at least part of the reason for a less impressive showing versus the dollar is a continued and somewhat unexpected resilience of the greenback. In a yen context, sterling keeps confounding our expectations, albeit at a miniscule level. The closely followed 21-day exponential moving average is at ¥144.23 and we continue to expect any attempts to scale it to be thwarted.

EUR/USD: The euro has had its sights firmly on ECB commentary. A slightly more negative characterisation of current risks to the central bank’s downgraded forecasts pushed the rate a modest 48 pips lower. The pair had already recouped around half of that by last look, possibly tilted higher by more positive budget murmurings from Italy’s coalition government.

EUR/GBP: With a surge higher of as much as 121 pips since Thursday’s sterling low against the euro, of which the pound retains about 80 at last look, this is one of its more solid gains. It reveals a truer impact on sentiment from a muddled few days in Westminster. The pound’s nearest immediate next challenge looks to be the edge of a consolidation zone at a Sunday night hourly low of 89.44 pence, before a spike low marked even earlier in the week at .8918 comes into play.

UK 100: The FTSE 100 consolidates its biggest rise of the month so far, heading for a close that’s less than 3 points lower than Wednesday’s.

Germany 30: Germany’s DAX joins global markets in a lacklustre indecisive session falling 0.1%.

Lloyds: Lloyds’ 0.6% fall trims less than a third of its gain a day ago.

Barclays: Barclays was initially set to extend a two-day rise before an intraday reversal. Greater sensitivity to international borrowing costs than its big domestic rival means that hints of tardier ECB tightening are more unsettling to its shareholders than those of Lloyds.

Shell: Across-the-sector weakness in oil shares leaves Shell down two pence.

BP: Reports that OPEC output rose somewhat before its cut last week soften sentiment that was improved by promising inventory data earlier this week. BP shares fell 3.6 pence.

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