Pound set for solid gains after tumultuous week for UK politics
|As we approach the end of what has been a busy and head-spinning week on Brexit it's worthwhile taking a step back to summarise. A series of votes have seen parliament reject PM May's deal and a no-deal Brexit before agreeing on an extension to Article 50. Another meaningful vote on May’s deal is scheduled for next Wednesday (20th March) - if it is passed the UK will seek an Article 50 extension to June 30th, if it is rejected once more then the UK will seek a longer extension (somewhere in the region of 1 year+).
UK Stocks close to 5-month highs
While unlikely, it is worth noting that there remains a slim chance the other 27 members of the EU won't provide the unanimous support needed for an extension, which would see the UK still leave the EU without a deal on March 29th - unless Article 50 is revoked. It’s also been a good week for UK equities with stocks in London showing considerably less intra-day volatility than the currency markets in their move higher and the benchmark is once more closing in on 5-month highs above the 7200 handle.
Sterling set for solid week of gains
So what does this all mean for the pound? Broadly speaking it's good news. The worst case scenario (no-deal Brexit) now looks highly unlikely, which means that either May's deal is passed or an even softer version is pursued during the longer extension. GBP is higher against all its major peers on the week, gaining the most against the JPY (2.2%) and also set for sizable gains against the USD (+1.7%). Predicting what will happen next for Brexit has proven to be something of a fool’s errand ever since the referendum, but if forced to take this risk and make a forecast then the most likely outcome appears to remain May’s deal passing (just) and a short extension of the Article 50 deadline.
Wetherspoons shares look through drop in earnings
There’s been a swift recovery in the stock of Wetherspoons following a soft start after shares began lower following the latest trading update. The interim results showed a 19% drop in pretax profit, to £50.3M for the 26 weeks to 27th January despite a rise a rise in revenue of 7.1%, to £889.6M. Margins appear to have been squeezed due to increased labor costs, with the operating margin falling to 7.1% from 8.9% prior. Free cash flow almost doubled to £71.7M, largely thanks to the timing of payments to supplies, although this is unlikely to provide a lasting benefit and will probably reverse by year-end. Shares in Wetherspoons remain firmly higher year-to-date and while the investors would have hoped for a more positive set of results, there’s not any major concerns that have been revealed.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.