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Pound rallies as May admits possible Brexit delay

Sterling had its best day since October yesterday, but the question is whether much has actually changed in the Brexit universe.

Pound rallies as May admits possible Brexit delay

Prime Minister Theresa May yesterday, 26 February signalled that Brexit could be delayed if MPs fail to back a revised deal next month, stating that neither the government nor businesses were prepared for a disorderly departure from the European Union.

Facing multiple resignations from pro-EU Conservative MPs, May conceded that the UK might have to seek a “short, limited” delay to Brexit rather than crash out of the EU without a deal on 29 March.

Sterling surged by more than 1 per cent overnight to a five-month peak of 1.3288 against the Dollar and hit a near two-year high of 1.1665 against the Euro.

Mark Carney said yesterday the Bank of England (BoE) would probably have to cut interest rates to support the economy in a no-deal scenario. The BoE governor’s comments showed a change in rhetoric from Carney’s previous suggestion that interest rates could move in either direction. He also noted a “no deal, no transition Brexit will be inflammatory”, noting a potential “substantial” fall in the exchange rate.

Meanwhile, the greenback remained at a near-three-week low after Federal Reserve Chair Jerome Powell reiterated that while recent soft data and rising global risks were unlikely to affect growth, the Fed would take a measured and patient approach to further interest rate hikes. The Dollar Index measuring the greenback against a basket of six major currencies, stood at 96.056 after shedding 0.4 per cent overnight.

In other news, the Australian Dollar was up again for the fourth straight session. Despite the Bank of Australia (BoA) warning of an interest rate cut earlier this month, Australia’s currency has contributed to  the Fed’s more dovish stance.

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Sterling jumps on potential Brexit delay

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