British pound extends gains amid Brexit developments

on Feb27
by | Comments Off on British pound extends gains amid Brexit developments |

Sterling added to gains on Wednesday as investors focused on Brexit developments that left the British pound once again one of the best performers.

The U.K. currency

GBPUSD, +0.5131%

defended its gains from the past sessions, as the possibility of a delay to the March 29 Brexit deadline is becoming more real, which is being interpreted as reducing the chance of a no-deal Brexit.

On Tuesday, Prime Minister Theresa May said lawmakers would be able to vote to delay Brexit should her deal get rejected in a March 12 vote. Parliament was initially expected to vote on May’s deal on Wednesday. Lawmakers will continue to discuss proposals on Wednesday, including measures to give politicians greater control over the Brexit proceedings. On Tuesday, an independent block of members of parliament said they would propose a second referendum.

Brexit Brief: Pro-Europe rebels mount another push to take control

Sterling rose to $1.3316, from $1.3252 late Tuesday in New York, making it one of the strongest major performers. At Wednesday’s session-high of $1.1337, sterling hit its highest level since June 2018.

The pound also strengthened against the euro

EURGBP, -0.5702%

with the shared currency buying £0.8549, down 0.5%.

“While the delay helps avoid some of the consequences of an abrupt departure from the EU it also is keeping industry in a sort of limbo that doesn’t allow for long term planning and hampers a number of business decisions,” said Fiona Cincotta, senior market analyst at City Index, in emailed comments. “Brexit could end up being delayed until 2021, which, for a lot of businesses will mean operating with one hand tied behind their backs for another two years.”

The ICE U.S. Dollar Index

DXY, +0.04%

 was last little changed at 96.032.

In U.S. economic data, the advanced trade deficit in goods rose 12.8% to $79.5 billion in December. Pending home sales for January and December factory orders are still due at 10 a.m.

Federal Reserve Chairman Jerome Powell will continue his congressional testimony in Washington on Wednesday, this time in front of members of the House. While his second day of testifying is less likely to bring surprises, investors focus on the Q&A.

In Tuesday’s remarks before members of the Senate, Powell stuck to his dovish script but also noted that the U.S. economic outlook remained favorable, despite tense trade relations with China and Brexit posing risks to international economies.

In over night data, investors will focus on China’s official services and nonmanufacturing PMIs for February, as well as the CFLP manufacturing PMI for the same month, all of which will be released at 8 p.m.

Elsewhere, the euro

EURUSD, -0.0878%

 $1.1384, versus $1.1390 late Tuesday.

Wednesday’s eurozone data drop for February was mixed, with the services confidence indicator beating estimates but industrial confidence slipping more than expected. Indicators for economic confidence, consumer confidence and business climate met expectations.

The Canadian dollar

USDCAD, -0.0683%

 held its strength versus the greenback following January inflation data that came in more or less in line with estimates. Year-over-year, consumer prices rose 1.4% in January. One U.S. dollar last bought C$1.3138, compared with $1.3169 late Tuesday.

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