Pound rallies to 21-month high on potential Brexit delay
The pound rallied to its highest level in almost two years on Tuesday on expectations that Britain’s impending departure from the European Union could be delayed.
Sterling, which has been a barometer of Brexit since the 2016 referendum, rose 0.73% versus the euro hitting a 21-month high of 1.162.
Against the US dollar, the pound grew 0.69% to 1.312, reaching a four-week high.
The British currency was buoyed by news that exit from the bloc could be pushed past the March 29 deadline.
Prime Minister Theresa May said if her deal is rejected next month MPs will vote on two proposals by March 13 on whether the country leaves the EU without a deal or delays Brexit.
David Madden, market analyst at CMC Markets, said: “Sterling reacted well to the news as the chances of the UK leaving without a deal seem to have diminished.”
Parliament has been in deadlock over Brexit since MPs rejected Mrs May’s withdrawal agreement last month with the risk of a no-deal Brexit increasing.
The pound was also lifted earlier by news that Labour has shifted its position and is backing a second referendum.
Meanwhile, the FTSE 100 was in the red due to the stronger pound and rebounded from highs on Monday following bullish sentiment over US-China trade talks.
London’s top index closed 32.62 points lower, or 0.45%, at 7,151.12, while Germany’s DAX rose 0.39% and France’s CAC grew 0.27%.
Mr Madden said: “Stock markets were firmly in the red in the morning, but European markets have pulled back most of their losses. Yesterday, traders welcomed the news that the US won’t be hiking up tariffs on Chinese imports in March, but the trade spat is still unresolved.
“The fact that European markets are off their lows of the session suggests sentiment is improving, but the trade dispute is far from over.”
In corporate news, Marks & Spencer confirmed it is in talks with Ocado over a possible joint venture, following weeks of speculation.
The retailer said there was no certainty that the discussions would result in an agreement, and there was no guaranteed timescale.
M&S shares closed up 9.5p to 303.2p and Ocado was up 103.8p to 990p.
Metro Bank announced plans to raise £350 million through a new share sale as it looks to plug a shortfall linked to an accounting error that saw nearly 40% wiped off its value in one day.
The lender said it has entered into a “standby underwrite agreement” with RBC Capital Markets, Jefferies and KBW for the equity raise.
Metro shares were down 243p to 1,300p.
The competition regulator waded into the proposed takeover of Provident Financial by Non-Standard Finance (NSF), as it mulls whether to investigate.
NSF has made a £1.3 billion approach for doorstep lender Provident, but was rebuked by the company’s management on Monday.
Provident shares increased by 6.6p to 603.4p.
Brent crude, the international benchmark, traded up 0.91% at 65.31 US dollars (£49.26).
The biggest risers on the FTSE 100 were Ocado up 103.8p to 990p, Barclays up 5.68p to 164.9p, GVC Holdings up 23p to 670p, and Next up 174p to 5,200p.
The biggest fallers were Fresnillo down 81.4p to 894.6p, International Consolidated Airlines Group down 28p to 617p, Croda down 179p to 4,881p, and BT down 7.4p to 220p.