CURRENCIES: British Pound Edges Higher On Brexit Trigger Day
March 29 2017 - 8:10AM
Dow Jones News
By Victor Reklaitis, MarketWatch , Suryatapa Bhattacharya
U.K. letter of notification has been signed and delivered
The British pound on Wednesday recovered somewhat from the prior
day's selloff as the U.K. formally started the process of leaving
the European Union.
The pound was changing hands at $1.2468, up slightly from
$1.2456 late Tuesday in New York.
Earlier, the British currency had slipped as much as 0.5% to
$1.2385, its lowest intraday level versus the greenback since March
21, but it then recovered.
The pound is now roughly unchanged for the week, and it's up by
about 1% against the dollar in 2017 to date. It's down about 17%
versus the buck since Britons voted on June 23 to leave the EU.
Meanwhile, the ICE U.S. Dollar Index was up 0.1% on Wednesday to
99.81, building a little on the prior day's 0.6% advance
(http://www.marketwatch.com/story/dollar-rebounds-in-step-with-stocks-attempt-to-halt-skid-2017-03-28)
that came after upbeat U.S. economic data.
The U.K. government letter formally starting the Brexit process
has been received by Donald Tusk
(Sterling%20had%20been%20under%20pressure%20late%20Tuesday%20in%20New%20York,%20falling%20as%20much%20as%200.9%%20to%20$1.2450%20versus%20the%20dollar.%20The%20pound%20weakened%20as%20the%20Scottish%20parliament%20voted%20to%20hold%20a%20second%20independence%20referendum,%20granting%20first%20minister%20Nicola%20Sturgeon%20the%20authority%20to%20negotiate%20with%20Westminster%20on%20holding%20another%20vote.),
president of the European Council, kicking off two years of
negotiations. The letter, which invokes Article 50 of the Lisbon
Treaty, formally states the U.K.'s intention to withdraw from the
European Union. It was handed over at lunchtime Wednesday in
Brussels after being signed by British Prime Minister Theresa May
the day before.
"The actual event is not necessarily the risk, but it's the
surrounding commentary," said Bart Wakabayashi, Tokyo branch
manager for State Street Bank and Trust.
Read:How to trade the pound as Theresa May pulls Brexit trigger
(http://www.marketwatch.com/story/avoid-being-short-with-the-crowd-how-to-trade-the-pound-as-may-pulls-brexit-trigger-2017-03-28)
There is a consensus among market participants that the two
sides -- Britain and the EU -- will get the concessions they are
seeking, but the concern is the process, Wakabayashi said.
"There is no shock factor here, but they are starting from such
different points that there is a risk of hiccups," he added. "They
are going to be discussing completely different points of view and
that's where the [market] volatility is coming from," Wakabayashi
said.
Read:New GBP1 coin has a secret feature -- and everyone is
baffled by it
(http://www.marketwatch.com/story/new-1-coin-has-a-secret-feature-and-everyone-is-baffled-by-it-2017-03-28)
Sterling had been under pressure late Tuesday in New York,
falling as much as 0.9% to $1.2450 versus the dollar. The pound
weakened as the Scottish parliament voted to hold a second
independence referendum, granting first minister Nicola Sturgeon
the authority to negotiate with Westminster on holding another
vote.
The recent pressure on the pound also has stemmed from the
dollar's rebound as investors refocus on the strength of the U.S.
economy.
"We believe that the dollar recovery will be more important for
the pound in the coming days," said Kathleen Brooks, research
director at City Index, in a note.
"The dollar index jumped by more than 0.5% and U.S. stock
markets closed higher for the first time in four days on Tuesday,
led by financials, a sector closely aligned with Mr. Trump's
success," she said. That suggests "investors are willing to trust
Trump again, as his policy team switch to tax reform after their
failure to get their health care bill passed."
On Tuesday, the Conference Board's consumer confidence index
surged in March to its highest level in 16 years. S&P CoreLogic
Case-Shiller Indices showed home prices in January rose at their
fastest rate since mid-2014.
Adding some flows back into the dollar and calming markets a bit
was U.S. data combined with market expectations that the European
Central Bank may continue to discuss easing its monetary policy,
said Koji Fukaya, chief executive of FPG Securities in Tokyo.
"Market participants are relieved on the economic front, but
some geopolitical risk in Europe remains," Fukaya said.
(END) Dow Jones Newswires
March 29, 2017 07:55 ET (11:55 GMT)
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