Pound recovers as markets eye Brexit, Fed
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Pound recovers as markets eye Brexit, Fed

London stocks rallied yesterday and the pound rebounded from no-deal Brexit fears, while traders awaited the outcome of a Federal Reserve policy meeting and crunch trade talks between China and the United States.

British Prime Minister Theresa May on Tuesday won a mandate from UK lawmakers to try to renegotiate her Brexit deal.

She is now hoping to unlock the impasse despite Brussels insisting that it will not budge.

“The pound initially fell, however, because (the) vote leaves a no-deal Brexit on the table”, said Neil Wilson, chief market analyst at Markets.com.

Having comprehensively re-jected the Brexit withdrawal agreement last month, British MPs late on Tuesday backed an amendment saying they would support the deal if its controversial “backstop” clause concerning the Irish border was removed.

Minori Uchida, Tokyo head of global markets research at MUFG Bank, said market players “are still thinking that a hard Brexit will be avoided in the end” even if “the optimism is groundless”.

With Britain otherwise on course for a chaotic exit from the bloc on March 29, Ms May faces a formidable challenge convincing Brussels to re-open an accord that took 18 months to conclude.

US stocks opened higher meanwhile, with China, monetary policy and earnings in focus. Meanwhile, earnings at Dow members Apple and Boeing, and data on private sector hiring all came in better than expected.

Traders are looking ahead to the end of the Federal Reserve’s latest policy meeting, with hopes for some guidance on its plans for US interest rates this year.

Yesterday also saw the start of high-level US-China trade talks, with Beijing’s top trade negotiator due to meet Donald Trump during a two-day gathering.

However, while markets have been supported by optimism over the talks in recent weeks, the US decision Monday to charge Chinese telecom titan Huawei on several counts of fraud and tech theft has muddied the waters.

Still, Treasury Secretary Steven Mnuchin insisted the two issues were not linked and said he saw the chance of a trade deal if China offered the right concessions.

“Some dealers have been sitting on their hands in advance of the meeting as a hopes aren’t overly high,” said CMC Markets analyst David Madden.

“Mnuchin stated he expects ‘significant progress’ to be made, but given the strained relationship between the US and China over the Huawei situation, the trade talks might suffer.”

Shares in Apple rose 5.1 per cent as trading opened, while those in Boeing climbed 6.0 per cent.

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