Pound holding up despite adverse Brexit developments
|The pound is holding up surprisingly well this morning, recovering a little after gapping lower over the weekend as hopes of a Brexit deal in principle this week have diminished significantly. The FTSE 100 is little changed near the 7000 level as stocks around the globe look to consolidate and lick their wounds after last week’s large scale selling.
Draft deal a non-starter
Several upbeat remarks from politicians on both sides of the channel had raised hopes in the last couple of weeks that the UK and EU would reach an agreement in principle before Wednesday’s EU summit. However, these hopes were dashed yesterday when a meeting in Brussels between Raab and Barnier seemed to yield no progress. The prospect of a prompt resolution is looking increasingly unlikely with both sides digging their heels in on key “unresolved issues” with the so-called Irish backstop chief amongst them. While the bulk of the agreement has been agreed upon, the small parts which haven’t seem to remain as far from a solution as they’ve ever been and unless one side is willing to cede - which doesn’t appear likely at present - then no agreement will be reached. This has once more raised the prospect of a no-deal scenario which could well cause another drop for the pound should it occur - or even if it appears to have a greater chance of happening.
Gold stocks gain on precious metal rally
The best performing blue-chip in London today is Randgold Resources with the stock rising over 4%. The chief cause of the gain has come as the price of Gold bullion reached its highest level in almost 3 months with the market starting to rally last week after US inflation data came in below forecasts and investors flocked to safe havens as stock markets tanked. With the level of speculative positioning in the market close to an all-time high there is a chance of a short squeeze should these rush to cover, which would provide greater buying power and send price even higher. A weaker pound is also good for Randgold and the share price has moved above 6000 today to trade not far from an 8-month high. The past couple of weeks have marked an impressive recovery for the stock which languished close to its lowest level since early 2016 just over a month ago, but a 30% rally since then has buoyed investors and with recent developments in both stock markets and on the Brexit front, their outlook has improved significantly.
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