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Sterling edges back as markets await outcome of Brexit talks

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A screen shows a graph showing a dip in the value of the Great British Pound Sterling against the US Dollarthe Traders work at the offices of CMC Markets in Canada on December 10, 2018 before Britain's Prime Minister Theresa May makes a statement in the House of Commons announcing the government's intention to delay the 'meaningful' vote on the Brexit withdrawl agreement. - British Prime Minister Theresa May on December 10, 2018 postponed a parliamentary vote on her Brexit deal to avoid a crushing defeat, saying she would return to the EU for further talks in a perceived sign of weakness that sent the pound plunging. (Photo by Daniel SORABJI / AFP) (Photo credit should read DANIEL SORABJI/AFP/Getty Images)

Sterling has slipped against the dollar and euro as traders nervously wait to see whether Britain can secure a last-minute Brexit deal with the European Union.

The pound was 0.12 per cent lower against the dollar by 8.10am UK time, buying $1.275. It had fallen 0.29 per cent against the euro to buy €1.154. Sterling has risen dramatically this week due to hopes of a Brexit deal.

Talks between the EU and UK will resume this morning after running into the early hours. Optimism has been spreading after reports that Prime Minister Boris Johnson had made a number of concessions, including agreeing to a border down the Irish sea.

Britain’s FTSE 100 opened lower, dropping 0.19 per cent soon after the bell to stand at 7.197.62.

Asian markets were higher as they headed to the close, with MSCI’s Asia Pacific index up 0.56 per cent. “Optimism about a potential Brexit deal moving closer supported risk assets,” said Danske Bank senior analyst Piet Christiansen.

However, Christiansen said obstacles remain, including potential opposition from the hardline Northern Irish Democratic Unionist Party (DUP). 

“We think a deal is unlikely, but that is not the same as saying the negotiations are breaking down,” he said. “Our base case remains for an extension and a snap election.”

China’s Shanghai composite index was 0.4 per cent lower as it approached the end of its day, despite the rest of Asia’s gains.

US-China relations showed signs of further strain yesterday after the US House of Representatives passed three bills taking a tough line with China over the Hong Kong protests to the chagrin of Beijing.

Deutsche Bank analyst Jim Reid said markets have cooled slightly this morning after China’s threatened “‘strong countermeasures’ should US Congress enact a bill supporting the Hong Kong protests”.

Reid also flagged potential Brexit problems which could weigh on markets including reported disgruntlement among hardline pro-Leave Tories.
“Clearly there are still key issues to be ironed out but that being said it would appear a deal is in the crosshairs. Stay tuned for more news this morning.”

(Image credit: Getty)