Consolidation of the Pound’s gains followed yesterday’s reports that Northern Ireland’s Democratic Unionist Party would back Theresa May’s Brexit deal if it includes time limits for the Irish backstop, reducing the risk of a no-deal Brexit.
Overnight, Sterling climbed as much as 0.5 per cent to 1.3137, its highest since last November, but dropped by 0.3 per cent to 1.3105. The Pound has rebounded by more than 5 per cent since reaching 1.2475 in mid-December.
Philip Hammond yesterday told business leaders at the World Economic Forum in Davos that “leaving without a deal would undermine our prosperity and would equally represent a betrayal of the promises that were made”. Only last week, the UK Chancellor of the Exchequer pledged to another group of executives to take a no-deal Brexit off the table.
Meanwhile, the Euro sank to its lowest point against the Dollar for more than two months after European Central Bank President Mario Draghi acknowledged that risks to the Eurozone’s economy were up, citing geopolitical uncertainties and the threat of protectionism.
The composite Eurozone Purchasing Managers’ Index (PMI) fell to its lowest level this month in more than five years, having expanded only slightly. However, Germany’s manufacturing sector is in contraction territory as the flash PMI dropped below the 50 level to 49.9. We should expect growth downgrades and a shift in the ECB’s monetary policy. The central bank had previously downplayed a string of weak economic data.
The single currency slipped below the $1.13 level for the first time since December 2017.
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