MW: Pound advances on easing fears over ‘hard’ Brexit
The pound was higher Wednesday, finding some relief as it appeared the U.K. could be facing a softer scenario on terms for its exit from the European Union.
Meanwhile, the euro wandered near its lowest in about three months.
The ICE U.S. Dollar index DXY, +0.11% , which gauges the greenback’s performance against six other currencies, was up 0.1% at 97.766. The WSJ Dollar Index BUXX, +0.05% , which uses a broader basket, was down 0.1% at 88.22.
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Sterling swings up: The pound GBPUSD, +0.7918% bought $1.2267. That was after it hit an intraday high of $1.2327, but it was still up from late Tuesday when it fetched $1.2124.
The pound showed improvement after U.K. Prime Minister Theresa May late Tuesday backed down, now allowing members of parliament to scrutinize the government’s strategy over the U.K. leaving the European Union. May wants Brexit talks to begin no later than the end of March.
May’s acceptance that Parliament should be allowed to vote on a Brexit deal may increase the chance that the U.K. could stay in the EU’s single market after the country formally leaves the bloc.
“That said, the concession was accompanied by a warning that it shouldn’t attempt to block or undermine the negotiating position of the government, with May determined to remain in full control of the talks,” said Craig Erlam, senior market analyst at Oanda, in a note.
Sterling’s “gains are small in comparison to the losses incurred by the pound recently so I don’t think these comments have greatly altered people’s outlook for sterling,” he added.
Sterling is now at its lowest level ever against a basket of currencies, according to the Bank of England, with that move coming as the pound tumbled to three-decade lows against the dollar and traded at its weakest against the euro in six years.
Investors have been watching the pound closely after a so-called “flash crash” in the currency last week, which took it down 6% in a matter of minutes.
But the “beneficial impact from a weaker pound on the U.K. economy is hard to ignore,” wrote Masashi Murata, currency strategist at Brown Brothers Harriman, noting strong exports and retail sales data in July and August.
“The pound’s tumble will help strengthen the expansionary phase of the U.K. economy, while some speculate the Bank of England may push back a lowering of rates, said Murata.
Read: U.K. pound rout promises most bang for your vacation buck
Other moves: The euro EURUSD, -0.2895% came under downside pressure against the dollar on increasing expectations that the Fed will raise rates this year. The shared currency was trading at $1.1018, hitting levels not seen since late July. The euro bought $1.1056 late Tuesday.
