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Pound steady after EU grants 6 months Brexit extension to Britain

Devdiscourse News Desk London
Updated: 11-04-2019 22:36 IST
Pound steady after EU grants 6 months Brexit extension to Britain

Image Credit: Pixabay

The pound steadied Thursday and European stocks held firm after Britain and its EU partners agreed again to extend Brexit. European leaders and British Prime Minister Theresa May opted to delay Brexit for up to six months, saving the continent from a chaotic no-deal departure on Friday.

"The high drama of a Brussels summit between the 28 EU leaders that ran late into the night failed to cause a commensurate move in the markets," noted XTB analyst David Cheetham. The deal struck in the early hours of Thursday allows Britain until October 31 to ratify the divorce it had initially set for March 29, but leaves the door open for Brexit anytime before then.

Traders breathed a sigh of relief but observers noted the reprieve was only brief with the agreement merely kicking the can down the road. If Britain has not ratified the divorce by May 22, it must hold elections to the European Parliament from May 23 to 26 or crash out of the bloc on June 1 with no deal.

"A second delay really has not surprised the markets," ETX Capital analyst Michael Baker told AFP. He added: "We are no closer to exiting the European Union -- or the panic-inducing no-deal scenario."

"The difference with this extension is that it contains the EU elections, with the UK obliged to take part. "If the UK has not agreed a compromise and does not hold elections then they are expected to leave with no agreement in place."

May remains under intense pressure from hardline Brexit supporters in her Conservative party not to compromise in talks with the opposition Labour party. The discussions are moving only slowly and it is not clear that they will reach an accord.

Richard Falkenhall, forex strategist at Swedish banking group SEB, expressed doubts over a cross-party agreement. "The small reactions in the pound and in markets in general are understandable as the outcome of the EU-summit was widely anticipated," Falkenhall told AFP.

"There are no winners on a hard Brexit and the EU is well known for kicking the can (down the road) whenever this is an option." He added: "Although it is a six-month extension we believe that May will try to reach an agreement with the Labour (party) soon enough to avoid British participation in the elections for the European Parliament, although we doubt she will manage this."

British business on Thursday gave a cautious welcome to the second Brexit extension -- but also urged an end to the "chaos" that has plagued the nation's withdrawal from the EU. Wall Street posted modest gains in the late New York morning, helped by optimism about the economy after the government reported fewer jobless claims than expected, providing another reason for the US central bank to hold fire in interest rate hikes.

"Further reports of progress in US-China negotiations" on trade also underpinned sentiment, analysts at Charles Schwab said. Earlier, Asian equities mostly fell, with few catalysts to drive buying and investors still on edge over trade frictions between the United States and Europe.

(With inputs from agencies.)

COUNTRY : United Kingdom