Sterling breaks past $1.24 to push FTSE 100 deeper into red
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The pound jumped higher in trading this afternoon, pushing the FTSE 100 closer to the 7,000 mark.
Sterling has climbed 0.9 per cent against the dollar, breaking past $1.24 for the first time in more than a week.
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The FTSE 100 has suffered further losses, edging down by 1.3 per cent.
“A one-week high in sterling has been driven by dollar weakness on the back of the two tough PMI figures, but also thanks to some optimism that the UK side of Brexit (if not the EU) is beginning to coalesce behind Boris Johnson’s deal,” said Chris Beauchamp, chief market analyst at IG.
He added: “The PM may have painted himself into a corner, but so have his opponents – so keen to avoid no deal, they may have to go with his deal if only because it is the only one going. However, the EU side are still not making the right kind of noises, which leaves the pound vulnerable to a sudden and brutal drop.”
Alan Custis, head of UK equities at Lazard Asset Management, said: “Another day, another sell-off. Economic data remains weak, US employment data did markets no favours this afternoon. What may be different today is that Sterling is appreciating by nearly one per cent versus the US dollar and this has up until now, been the litmus test for how Brexit negotiations are progressing, with a strong pound signalling that a deal may be forthcoming.”
Like on Wednesday, the FTSE was the most ailing index. Losing 110 points, it now is struggling to cling on above 7000, a level it last breached, however briefly, at the end of August,” said Connor Campbell, a financial analyst at Spreadex.
Campbell added: “That FTSE’s Thursday has been (slightly) worse than its peers is because of the pound’s arguably inexplicable gains.
“Ignoring the EU’s claim that Boris Johnson’s border solution is ‘not even remotely acceptable’, sterling found a way to benefit from the dollar and euro’s own ills. Cable shot up 0.8%, sporadically crossing $1.24 in the process, while against the single currency the pound added half a percent to sit at €1.1285.”
The movements come after Boris Johnson told the Commons this morning that his Brexit proposals published yesterday were a “genuine attempt to bridge the chasm.
Irish PM Leo Varadkar responded today by saying that the proposals were welcome, but “fall short in a number of aspects”.
Markets across the world have been rocked in the last 24 hours as Brexit uncertainty and talk of a US-EU trade war caused jitters among traders.
Historically, when GBP rises in value, companies within the FTSE 100 fall in value.
The FTSE 100 was the worst-hit index yesterday, falling three per cent in its worst day of trading in more than three years.
Ted Baker was among the firms to drag down London markets after the fashion retailer slumped to a half-year loss.
A new trade war front between the US and the EU also riled Asian markets, with Japan’s Nikkei dropping two per cent today at 21,341 today.
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All of Tokyo’s 33 sub-sector indexes also ended in negative territory, dragged down by carmakers and miners.
Washington has vowed to impose new tariffs on a range of European goods, from French wine to Italian cheese.