Tuesday 26 September 2017

Sterling shows Brexit jitters ahead of landmark move to trigger Article 50

The pound was down 0.4pc against the US dollar at 1.24
The pound was down 0.4pc against the US dollar at 1.24

Ben Woods

Sterling was showing some Brexit jitters ahead of Theresa May's landmark move to trigger Britain's exit from the European Union.

The pound was down 0.4pc against the US dollar at 1.24, and slipped 0.2pc versus the euro at 1.149, as the Prime Minister signed the historic letter that will start the Article 50 process.

The FTSE 100 index began the session on the front foot, rising 25 points to 7,368.11, continuing gains from the previous session when it was buoyed by the UK currency's decline.

Neil Wilson, senior market analyst at ETX Capital, said the pound would struggle for momentum unless the Prime Minister "strikes an unexpectedly dovish stance".

He said: "Details are everything now. We could be in for a rough ride today as currency traders react to the contents of the letter being delivered to Brussels and the language May uses in parliament.

"And we're in for a long period of volatility for the pound and UK assets as the Government embarks on protracted and hugely challenging Brexit negotiations.

"Markets are only a gauge though, they're not always that great at pricing in the kind of political risk associated with Brexit.

"In the backdrop is Scotland and the threat of a break-up of the UK."

Britain's permanent European Union representative Sir Tim Barrow will hand deliver the Article 50 document to the EU council president Donald Tusk on Wednesday, as Mrs May faces MPs' questions in Parliament.

It will mark the start of complex and contentious negotiations that put the UK on course to break its ties with the Brussels club by the end of March 2019.

Mr Wilson added: "The big question now is whether Brexit has been fully factored in.

"A truly hard Brexit has not been priced into sterling. We could see it move lower still if negotiations take a sour turn - 1.10 US dollar is feasible."

Across Europe, Germany's Dax was up 0.6pc and the Cac 40 in France rose 0.5%.

The price of oil was climbing as armed protesters blocked the western Libyan oil fields of Sharara and Wafa, disrupting supply. Brent crude was up 0.6pc to 51.66 US dollars a barrel.

In UK stocks, mining giant BHP Billiton was among the biggest risers on the top flight after it said it was well-positioned to boost value and returns from its western Australia iron ore operation.

Shares were up more than 2pc, or 28p to 1,255p.

In a contrast of fortunes, travel giant Tui Group sank into the red despite summer holiday bookings meeting expectations.

The Thomson owner said British sun-seekers were snapping up more long-haul holidays and cruises as concern over terrorist attacks and political turmoil continue to blight markets in Turkey and North Africa.

Its northern region, which includes the UK market, recorded an 11pc and 10pc jump in revenues for the winter and summer periods respectively.

Chief executive Friedrich Joussen said winter trading had been helped by a "good performance" from its hotels and resorts arm, while summer bookings were in line with forecasts.

Shares were off 9p to 1,126p.

Press Association

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