Brexit Uncertainty Sends the Pound to Annual Lows

Market Reviews

The British pound fell sharply after it became known that UK Prime Minister Theresa May is going to call off tomorrow’s Brexit parliamentary vote. It’s reported, that Theresa May has abruptly called off tomorrow’s parliamentary vote on her Brexit deal. There is no confirmation yet but the news is widely reported and not denied. May is set to make a statement later today.

As a result, the pound has fallen off and is now testing annual lows versus the US dollar amid fears that parliament may vote against the Brexit deal.

The pound was also pressured by weak GDP data. UK GDP grew 0.4% on a three-month rolling basis in October, slowing from the 0.6% expansion seen in the third quarter. In October alone, Britain’s economy expanded by 0.1%, following flat growth in August and September. On an annualized basis, Britain’s gross domestic product growth was 1.5%, as in September.

Today’s economic data from Britain also showed, that industrial production dropped 0.6% mom, 0.8% yoy in October versus expectation of 0.1% mom, -0.2% yoy. Manufacturing production fell 0.9% mom, -1.0% yoy versus expectation of 0.0% mom, 0.0% yoy. Trade deficit widened to GBP -11.9B versus expectation of GBP -10.5B. Construction output dropped -0.2% mom versus expectation of -0.4% mom.

The euro remains strong, ignoring weak investor confidence data. Eurozone Sentix Investor Confidence fell sharply to -0.3 in December, down from 8.8 in November and missed forecast of 8.4. It’s also the fourth decline in a row, and lowest reading since December 2014. Expectation index also dropped to -18.8, lowest since August 2012.

On stock markets, FTSE added 0.49%, DAX fell 0.39% and CAC dropped 0.30%. Earlier in Asia, Nikkei closed down 2.12%, Hong Kong HSI fell 1.19%, China Shanghai SSE dropped 0.82%, Singapore Strait Times declined 1.24%.