Pound drops as Brexit impasse drags

By AFP

Nearing midday in London, the pound was down about 0.3 percent versus both the dollar and euro.

Pound 350x210

POUND VS DOLLAR

BRITAIN - The pound dropped versus the dollar and euro on Tuesday after British MPs once again rejected a series of alternative options to Prime Minister Theresa May's EU divorce deal.

After Monday's voting outcomes, the European Union's chief negotiator Michel Barnier warned it is "day after day more likely" that Britain will crash out of the bloc next week without an orderly withdrawal agreement.

Nearing midday in London, the pound was down about 0.3 percent versus both the dollar and euro.

"European markets are mixed... but a weaker pound has helped the FTSE 100 to rise above the gloom," noted Chris Beauchamp, chief market analyst at IG trading group.

The benchmark London FTSE 100 index features several multinationals who earn vast sums in dollars.

"As ever, the pound is the clearest gauge of the market's view on continued (Brexit) uncertainty and is halfheartedly losing ground against the euro and the dollar," said Fiona Cincotta, senior market analyst at City Index.

"Parliamentary disarray is also hitting the euro because a disorderly Brexit has the potential to affect European companies trading with the UK.

"Of the European gauges, the (Frankfurt) DAX is possibly in the worst position to withstand a disorderly Brexit as Germany is already flirting with a recession and if its exports of cars and car parts to the UK are affected it would add to problems already created by the slowdown of trade with China," Cincotta added in a client note.

In another downbeat note for the economic outlook, the World Trade Organization forecast Tuesday that global trade growth would be lower in 2019 than last year.

In its main annual forecast, the WTO revised its prediction for this year down from 3.7 percent to 2.6 percent, citing widespread "tensions" and economic uncertainty, including Brexit and tariffs between the US and China.