There was a level of uniform good cheer at the start of Wednesday, the kind that may be hard to maintain across an entire session of trading.
After sinking below $1.20 on Tuesday, moping at prices last seen all the way back in 1985, sterling was thrown a lifeline by a parliament determined to avoid a no-deal Brexit. Firstly, now-former Tory MP Philip Lee wiped out Boris Johnson’s majority, defecting to the Lib Dems midway through the PM’s speech about the latest G7 summit. That was read as positive by the pound, for the simple fact that it makes it a bit harder for Johnson to (legally) force through his no-deal agenda.
Then, the biggie. A cross-party coalition of sorts, including 21 rebel Tories, voted to seize control of the Commons – 328 MPs to 301 – setting the stage for a debate on a bill seeking a Brexit extension until at least January 31st, with the intention of rushing it through before parliament is suspended next week.
The complicating factor here, and the reason that sterling’s gains, while notable – it’s up 0.5% against the dollar and 0.4% against the euro – aren’t even greater, is the potential for a general election. Boris Johnson is seeking a snap vote, while Labour will only back a trip to the polling booth once the no-deal-blocking bill is successful.
Normally such gains for the pound would spell a miserable morning for the FTSE. However, good news elsewhere allowed the UK index to largely keep instep with its Eurozone peers, crossing 7300 for the first time in a month as it rose 0.8%. This growth – which has also seen the DAX and CAC climb 1.1% and 1.2% respectively – stems from a couple of things. Firstly, the confirmation of a new government in Italy; secondly, a better than forecast services PMI from China, a reading that has temporarily allayed some of investors’ trade war impact concerns.
Now all the market has to do is keep hold of these gains...
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