No-deal vote helps boost sterling

The pound has gained ground after stronger retail sales figures and a vote to help mitigate the chance of a no-deal Brexit. Elsewhere, crude prices have continued their declines, despite the geopolitical risks that come with the Iranian seizure of a foreign tanker in the Straits of Hormuz.

• UK retail sales beat helps push pound higher
• Parliament vote helps lessen chance of no-deal Brexit
• Crude prices tumble despite the Iranian seizure of a ‘foreign tanker’

Gains for the pound have come at the expense of UK stocks today, with the FTSE 100 hitting a July-low in early trade today. The biggest loser was Fresnillo, with the gold producer seeing production tumble despite recently hitting six-year highs. Meanwhile, the declines seen throughout European markets has seen an increased demand for defensive stocks, pushing the likes of British American Tobacco and Imperial Brands upwards. 

A surprise jump in UK retail sales sent the pound surging, with June retail sales averting fears of a long-standing slump in consumer spending after May retail sales came in at the lowest level in more than a year. However, while the retail sector may be breathing a sigh of relief, much of the increase in sales comes for second-hand goods, while high street brands are also relying heavily on discounted products with lower margins.

The upside seen in the pound was intensified by the prospect of a lessened chance of a no-deal Brexit, after MPs voted for a proposal which will make it difficult for the next PM to bypass Parliament in a bid to enact a no-deal Brexit in October. The trajectory of the pound has been closely tied to the chances of a no-deal Brexit, and thus today’s gains prove markets see this as a key step in staving such an event.

Crude prices have shrugged off today’s Iranian seizure of a foreign tanker, with markets instead focusing in on yesterday’s US inventories data. While such geopolitical tension would ordinarily bring a sharp rise in oil prices, we are instead seeing a bout of selling for crude. Ultimately markets are focusing in on US production, and the smaller than expected inventories drawdown yesterday could hint at an end to the trend of shrinking stocks over recent weeks.