The British pound rose against the dollar yesterday after Prime Minister Theresa May offered cross-party talks with the leader of the opposition Labour Party in a political gamble aimed at resolving the Brexit impasse.
Sterling won a boost after Conservative leader Ms May declared late Tuesday that she would look for another Brexit delay and softened her position to try and avert a messy no-deal divorce from the European Union next week.
Labour leader Jeremy Corbyn has consistently called for Britain to remain in a Customs union with the bloc, while the government has so far ruled this out saying Britain should have an independent trade policy after Brexit.
“The announcement was win-win for the pound,” Oanda analyst Craig Erlam told AFP.
“Not only did May re-affirm her opposition to no deal, she’s technically opened the door to a softer Brexit. I say technically because a lot now has to happen for that to be delivered, including the Conservatives and Labour working together towards an uncharacteristic compromise.”
AxiTrader analyst James Hughes, meanwhile, questioned why Ms May had waited this long to hold discussions with Mr Corbyn.
“This feels very much like the last throw of the dice, with the argument being that cross-party talks should have been the first throw of the dice,” Mr Hughes told AFP yesterday.
However, sterling’s gains were capped yesterday by a gloomy survey showing that Britain’s vital services sector shrank in March for the first time in almost three years, with activity slammed by Brexit turmoil and flat economic growth.
Trading on Wall Street opened higher yesterday, despite new data showing that hiring in the US private sector slowed for the second month in a row in March.
The monthly data from payrolls firm ADP comes two days before a more closely watched government report on employment.
Meanwhile, European and Asian stock markets advanced as a report said China and the US were closing in on a deal to end their long-running trade row.
Frankfurt’s DAX 30 index in particular charged forward, up more than 1.3 per cent on the day in afternoon trading after investor optimism was given an extra boost by a report in the Financial Times saying Beijing and Washington were on course for a historic agreement.
Expectations that the world’s top two economies will sign a deal has been a key driver of a global equities rally this year, and the FT article adds to the general sense of hope.
“Clearly, the stock market continues to look at those negotiations with a glass-is-half-full mentality,” said Briefing.com analyst Patrick O’Hare.