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Pound pounded

The British Pound was thumped in overnight trading as four ministers resigned from Prime Minister May’s cabinet. Bonds rallied and European shares sank as opposition to May’s Brexit plans rose. The US dollar also fell, losing ground against most major currencies. However a rally in US shares that snapped a five session losing streak sees Asia Pacific stocks set for opening gains.

The Pound shed almost three US cents in as many hours as the UK government fractured. The “backstop” provisions for Northern Ireland are a rallying point, but the draft agreement put forward by the PM is replete with fudges, that merely defer hard decisions. The current government’s survival is in question, and currency traders reacted accordingly.

Stronger US retail sales and manufacturing data short circuited the negative trading. The US Dollar rallied off lows and stocks rose, although bond traders were less convinced. Oil and base metals also rallied in further evidence of a pro-growth stance for markets. Futures are pointing to opening gains in Hong Kong, Tokyo and Sydney, providing welcome relief after a torrid week.

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