GBP awaits Davis decision
|The pound is trading fairly mixed on the day as Brexit-politics threatens to come back to the fore for the markets with rumours doing the rounds that David Davis could be set to resign. Sterling has reached its highest level in over 2 weeks against the US dollar, but if truth be told this is more reflection of weakness in the buck rather than pound strength.
Irish border the source of contention
The government’s decision regarding the only land border between the UK and the EU in Ireland was always going to be a sensitive topic given the historical tensions in the region and a final backstop plan to avoid a hard border in Northern Ireland has caused a rift between the Brexit secretary and PM May. Davis is unhappy that the agreed text would not contain a firm end date to what is called a transitional arrangement, and appears to believe this would continue indefinitely which he deems as unacceptable.
Should Davis hand in his resignation today it would represent a pretty big blow for Brexiteers and their hopes of a less “soft” Brexit. In terms of how the markets would view this there are two opposing schools of thought. On the one hand, the resignation of a key member of the cabinet could be seen to cause more disruption, possibly even leading to a leadership challenger and therefore be seen as negative for the pound. On the other however, traders may in fact view the move as another significant step away from a “hard” Brexit which would obviously contain less potential for major disruption and be sterling positive. On balance the second point of view appears to hold more weight although the markets could see knee-jerk reaction lower upon the announcement - should it occur.
Technical issue delays LSE open
Trade didn’t begin on the London Stock Exchange (LSE) until over an hour after the usual start time of 8AM this morning due to a “technical issue.” The fault prevented the opening auction from taking place although some UK listed companies did trade via Cboe Europe, the main rival to LSE for share trading in London.
The market eventually opened shortly after 9AM with the blue-chip benchmark a few tenths of a percent higher and while it has had minimal disruption in terms of the price for the index, it does reflect poorly on the institution which has also suffered issues with regulatory news announcements in recent months. The LSE was without a CEO for 7 months after Xavier Rolet left towards the back end of last year and his replacement David Schwimmer will be keen to ensure that today’s problem is a one-off and not repeated anytime soon.
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