Markets breathe sigh of relief over no deal Brexit risk

Denise Jackson

The foreign exchange trading markets breathed a sigh of relief on Wednesday and into Thursday after a law which seeks to prevent a no deal Brexit from taking place passed further through the British Parliament.

The bill, which is close to becoming law, has reassured investors that the UK cannot crash out of the European Union without a deal on 31st October.

However, the pound may now have to deal with another type of political instability – a general election.

Last night, Boris Johnson’s Conservative Party made an attempt to call an election, but he was outvoted.

Some believe that the opposition Labour Party and other parties like the Scottish National Party may choose to vote for an election next week provided the no deal prevention bill is signed into law.

Despite this, the pound rose in its pair against the US dollar and reached $1.2242 at one stage.

This represented its best position in this pair in nearly six months, reassuring sterling investors.

Elsewhere, the single European currency also recorded a big rise against the dollar – this time going up by 0.6%.

It was recorded at $1.1033 in the pair with the US dollar at one stage.

This had knock-on effects for the US dollar index tool, which is heavily weighted towards the euro.

The tool, which measures the greenback’s performance relative to other assets, went down to 98.390 – which was its worst position for seven days.

The dollar’s poor performance was also down in part to the latest stage of the fight between China and the US over trade and tariffs.

President Donald Trump, who is running for re-election in the 2020 presidential election which takes place in November of next year, said that he would be “tougher” against China if he won office again.

China itself, meanwhile, appeared to be getting ready to enhance its lending offer.

It said that it would change an important ratio known as the reserve requirement ratio (RRR) soon.

China’s government controls its central bank.

This is unlike how it is done elsewhere, where central banks tend to be independent.

The Canadian dollar rose to CAD$1.3344 against the US dollar.

This came as the Bank of Canada announced that it would keep interest rates steady at their previous position of 1.75%.

It was also revealed during the decision that the Bank is a little more hawkish than had previously been thought – which also played in the currency’s favour.

The Japanese yen was down over the course of the day.

This was down in part to a reduced sense of risk in the geopolitical world.

Hong Kong’s leader Carrie Lam announced that she would no longer pursue the extradition bill that had driven the city into a state of protest.

The yen, which tends to do well during times of worry and risk in the global political and economic spheres, was down in its pair against the US dollar.

It was seen at 106.42, which was its best position since last Friday.

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Denise Jackson
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