The pound traded steady yesterday 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 today.
“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.
News of the delay allowed traders to breathe 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 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.
“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.
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.
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 yesterday 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 edged higher at the opening, helped by optimism about the economy after the government reported jobless claims data that came in lower 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 lifted 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.