Pound rises after May's Brexit deal defeat
Surge suggests traders still view 'hard Brexit' as remote possibility
New York: The British pound rallied Tuesday after the lower house of parliament overwhelmingly rejected Prime Minister Theresa May’s Brexit plan, while global stocks climbed.
The pound’s surge after the lopsided vote suggested traders still viewed a so-called “hard Brexit” — one with no agreement between the EU and Britain — as a remote possibility.
US stocks pulled back somewhat after the British vote tally but quickly recovered to join stock markets in Europe and Asia in moving higher following news that China planned tax cuts to boost the economy.
Near 9.40pm GMT (1.40am Wednesday UAE), the pound stood at 88.66 pence to the euro, compared with 89.57 and 89.15 Monday night.
Against the dollar, the pound traded at $1.2871 against $1.2704 and $1.2864 Monday night.
The House of Commons voted 432 to 202 against May’s plan for taking Britain out of the European Union, one of the biggest defeats ever suffered by a British prime minister.
The negative vote had been expected but the margin was much bigger than May had hoped. Ahead of the vote, some analysts had predicted the pound could plunge with a one-sided defeat, such as 200 votes or more.
BK Asset Management’s Boris Schlossberg said investors simply did not believe there was a realistic chance of a so-called “hard” Brexit.
“Markets project beliefs and the underlying belief is that nobody’s going to be committing economic suicide,” he said.
Jeremy Stretch, head of Group-of-10 currency strategy at Canadian Imperial Bank of Commerce, told Bloomberg the outcome boosted the odds of a delay, a second referendum or even no Brexit at all.
Earlier European stock markets enjoyed cautious gains after Asia swung higher as worries dimmed over a global economic slowdown and Wall Street posted modest gains in the late New York morning.
Asian equity markets rebounded from the previous day’s sharp losses, with Hong Kong and Shanghai lifted by Chinese plans to slash taxes to boost the economy.
US stocks also pushed higher, brushing aside mixed banking earnings and an ongoing government shutdown.
Among individual companies, Netflix surged 6.5 per cent after announcing price hikes, including raising the cost of its most popular monthly plan to $13 from $11.
The good mood helped lift the tech sector generally. Google-parent Alphabet and Microsoft each rose about three per cent. Apple rose 2.1 per cent.