Sterling bounces on Brexit uncertainty

Sterling bobbed up and down Wednesday as Brexit-related reports that kept traders guessing about how the situation was developing, dealers said.

In what has already been a topsy-turvy week, the pound was catapulted on Tuesday to the highest levels against the dollar and euro since May, propelled by Brexit deal hopes that subsequently appeared to be fading somewhat.

Following early losses on Wednesday, sterling bounced back and was still trading at elevated levels later in the day.

"The pound is once again finding support, reaching new five-month highs this Wednesday when it touched USD 1.2840, as currency markets move to price in increased chances of a deal being reached between the UK and the EU," said Ricardo Evangelista a senior analyst at ActivTrades.

 

The European Union's chief Brexit negotiator Michel Barnier nonetheless warned senior officials that "significant issues" remain in the way of efforts to agree a deal with London on the eve of a key summit.

London stocks lapsed into the red in initial trading and remained there in afternoon exchanges.

Asian and other European stock markets experienced mixed fortunes as traders eyed signs of China-US tensions over Hong Kong.

In the US, stocks were slightly lower in opening trade after data showed that consumers spent less in September, breaking a seven-month increase.

"Fresh uncertainty in relation to Brexit has hit sentiment" in Britain remarked analyst David Madden at CMC Markets UK.

"It was reported the EU said a deal was impossible unless the UK moves, which has dashed hopes for the possibility of an agreement being reached soon.

"Much of the major gains that were made yesterday were driven by the prospect of a deal being achieved, so now some dealers are reversing their positions."

Irish Prime Minister Leo Varadkar, speaking before leaders of the bloc's member states meet on Thursday and Friday, said he remained hopeful that Britain would secure a deal.

Officials said talks could always resume next week and a special summit be called just in time for British Prime Minister Boris Johnson to fulfil his pledge to take Britain out of the EU on October 31.

Hong Kong's stock market climbed after suffering a brief mid-session drop after the city's leader Carrie Lam was forced to abandon a State of the Union-style policy speech owing to heckling by opposition lawmakers.

Shanghai ended lower with investors moving cautiously as China said it would take "strong measures" after the US House of Representatives passed a bill sought by pro-democracy protesters in Hong Kong that aims to defend civil rights in the city.

If approved by the Senate, the law would end the Hong Kong-US special trading status unless the State Department certifies annually that city authorities are respecting human rights and the rule of law.

Adding to unease was a report saying China wanted the US to remove the threat of new tariffs slated for December before it could ramp up its purchase of agricultural goods, which was part of last Friday's agreement.

The Bloomberg News story cited sources as saying Beijing would not buy the USD 40-USD 50 billion of products Donald Trump claimed it would unless the levies were lifted.