Sterling trades near five-month high on Brexit, yuan steady after China GDP

© Reuters. Wads of British Pound Sterling banknotes are stacked in piles at the Money Service Austria company’s headquarters in Vienna

By Stanley White

TOKYO (Reuters) – The pound traded near a five-month high against the dollar and the euro after Britain’s prime minister Boris Johnson and European Union leaders agreed a new deal for Britain to exit the bloc.

The yuan held steady against the dollar after data showed China’s economy grew at the weakest pace in more than 27 years in the third quarter due to a costly trade war with the United States and weak factory production.

Sterling’s gains on the dollar helped push the greenback to a five-month low versus the euro and a three-week low against the Swiss franc.

Initial relief at securing the long-awaited Brexit deal could be brief, however, because the prime minister still needs to sell the agreement to sceptical lawmakers when parliament sits on Saturday.

Once Britain does leave the EU, its economic growth is expected to slow, which is likely to be a negative for sterling in the longer term, analysts warn.

“Assuming we clear the parliamentary hurdle, the pound has room to rise further because there are a lot of shorts to be unwound,” said Takuya Kanda, general manager of the research department at Research Institute in Tokyo.

“But after that, people will start to question whether this is really good for Britain’s economy, and further gains in sterling could become difficult.”

The pound traded at $1.2853 on Friday, close to a five-month high of $1.2988 reached on Thursday after EU leaders unanimously backed the new Brexit deal with Britain.

READ  Liberal Democrats formally adopt 'Stop Brexit' policy

Against the euro (), sterling traded at 86.58 pence, near a five-month high of 85.77 pence.

For the week, the pound was on course for a 1.6% gain versus the dollar and a 0.7% rise against the common currency.

Britain’s new Brexit deal has a “decent chance” of clearing parliament on Saturday, Finance Minister Sajid Javid said, but some investors are wary because debate so far on Brexit has been fractious and difficult to predict.

Even if Johnson can win approval in parliament, Britain is still on course for more distant economic ties and increased trade barriers with the EU, which many economists say will slow growth in the UK.

China’s economic growth slowed more than expected to 6.0% year-on-year in the third quarter, the weakest pace in at least 27-1/2 years, as demand at home and abroad faltered amid a bruising Sino-U.S. trade war.

In the onshore market, the yuan traded at 7.0779 per dollar little changed on the day. In the offshore market, the yuan was quoted at 7.0797 versus the greenback.

Friday’s data marked a further loss of momentum for the Chinese economy from the second quarter’s 6.2% growth, likely raising expectations that Beijing needs to roll out more measures to ward off a sharper slowdown.

The world’s two-largest economies have imposed tariffs on each other’s goods in a dispute over China’s trade and industrial policies that has slammed the brakes on global economic growth.

Worries about weak U.S. economic data kept the greenback lower against other currencies.

The dollar traded at 0.9873 Swiss franc , close to the lowest since Sept. 25 and on course for its biggest weekly decline since Aug. 9.

READ  What you can buy for 1p and 2p as the Government confirms the coins are here to stay

The dollar was quoted at 108.56 yen, headed for its second week of gains.


Leave a Reply