Pound hits 2-month high on Brexit breakthrough
Sterling has hit its highest level against the US dollar since late September this morning following reports last night that indicate the UK will cede to the EU’s demands with regards to the Brexit divorce bill. The surge has weighed on the FTSE which has fallen lower by more than 40 points and is back near the 7400 level after erasing the bulk of the gains seen in the early part of the week.
Brexit talks begin to progress
The positive reaction seen in the pound following the news that the UK would pay its EU liabilities may seem a little counter-intuitive at first but the expected progress this will allow in the discussions going forward appears to have outweighed the financial cost which is said to be worth around €100bn. This figure simply reflects the payments from the UK to the EU and doesn’t account for the money received back, with net payments forecast to be around half that amount. The decision to bow to EU demands has removed one of the biggest obstacles to the divorce settlement and if citizens rights, and the contentious question surrounding what to do with the border between Northern Ireland and the Republic can be resolved promptly then talks can hopefully progress to future trade relations.
LSE shares drop after Rolet quits
One of the biggest fallers this morning has been the London Stock Exchange Group (LON:LSE), with shares lower by more than 2% after Xavier Rolet announced that he will step down immediately. Mr Rolet, the CEO of LSE, was due to leave by the end of next year but has resigned with immediate effect after a request by the board due to the “unwelcome publicity” his position is bringing. Yesterday, BoE Governor Mark Carney weighed into what has been a particularly tense situation with activist investor Sir Chris Hohn repeatedly challenging the LSE board by accusing them of forcing Rolet out to the detriment of the firm. Carney’s comments that he was “mystified” by the debate are possibly in no small part, what the board were referring to as “unwelcome publicity” and less than 24 hours after they were made Rolet has left his role.
Elsewhere, mining stocks are amongst the most sensitive to the strength of sterling and the latest push higher in the pound has weighed on the sector. BHP Billiton (LON:BLT), Glencore (LON:GLEN) and Rio Tinto (LON:RIO) have all fallen around 1.5% on the day.