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Pound bounces back from all-time low as government agrees to debate Brexit – Business live Pound falls back towards record low as rally fizzles out – Business live
(35 minutes later)
2.33pm BST
14:33
Pound falls back as government outlines Brexit strategy
The pound lurched back below $1.22 as the government outlined its Brexit strategy -- although David Davis didn’t shed much new light on the situation.
Secretary of state Davis promised to get the best possible terms for the UK as it leaves the EU, but refused to say whether, for example, it had ruled out retaining membership of the single market.
Anna Soubry asks whether UK has ruled out single market membership, yes or no? Davis says it's an eg of problem w/ language in the EU debate
Instead, Davis said he could only outline the government’s “overarching aims”, saying:
“We have been pretty clear on the overarching aims. Not the detailed aims. We’re not even at the point that that’s possible.
Davis insists this is sensible, as the government isn’t planning to trigger article 50 for several months. But this lack of detail could disappoint the financial markets as they try to get a grip on Brexit.
So, the pound is now only up 0.6% against the US today, meaning it’s close to the all-time record low hit yesterday.
Remember, the deputy governor of the Bank of England has already warned today that markets don’t cope well with political uncertainty....
Christopher Vecchio of DailyFX.com reckons that investors are fretting about Brexit again, after a brief respite this morning...
UK 10Y Gilts are selling off in conjunction with $GBPUSD turning lower...'Hard Brexit' fears are returning after overnight respite.
Seems that UK PM May's decision for parliamentary inclusion is for show only; 'Hard Brexit' still the most likely outcome.
2.17pm BST
14:17
British government debt is also dropping in value, hitting its weakest level since the end of Jube.
The yield (or interest rate) on 10-year gilts has risen to 1.06%, from 0.98% last night.
Yields rise when prices fall, so this means investors are selling gilts, pushing up the cost of servicing Britain’s national debt and financing the deficit.
1.58pm BST1.58pm BST
13:5813:58
Another day, another bout of sterling volatility....Another day, another bout of sterling volatility....
STERLING FALLS BACK BELOW $1.2200 AS U.S. INVESTORS SELL POUND, NOW UP JUST 0.6 PCT ON DAYSTERLING FALLS BACK BELOW $1.2200 AS U.S. INVESTORS SELL POUND, NOW UP JUST 0.6 PCT ON DAY
1.54pm BST1.54pm BST
13:5413:54
(•_•)<) )╯Here / \\(•_•) ( (> we go / \ (•_•)<) )> again / \£/$1.22(•_•)<) )╯Here / \\(•_•) ( (> we go / \ (•_•)<) )> again / \£/$1.22
1.52pm BST1.52pm BST
13:5213:52
Eek, the pound is now shedding some of its earlier surge. It’s now up just one cent, at $1.22, having hit $1.23 earlier.Eek, the pound is now shedding some of its earlier surge. It’s now up just one cent, at $1.22, having hit $1.23 earlier.
Investors may be watching parliament, where David Davis, secretary of state for exiting the EU, has insisted no party will get a veto on Brexit.Investors may be watching parliament, where David Davis, secretary of state for exiting the EU, has insisted no party will get a veto on Brexit.
1.32pm BST1.32pm BST
13:3213:32
A fascinating debate is underway in the House of Commons now, as MPs discuss how they will scrutinise Brexit.A fascinating debate is underway in the House of Commons now, as MPs discuss how they will scrutinise Brexit.
Keir Starmer, Labour’s shadow secretary for exiting the EU, is arguing that parliament must get a vote on the terms of leaving the European Union.Keir Starmer, Labour’s shadow secretary for exiting the EU, is arguing that parliament must get a vote on the terms of leaving the European Union.
Other members are agreeing, including former attorney general (and Conservative MP) Dominic Grieve:Other members are agreeing, including former attorney general (and Conservative MP) Dominic Grieve:
Tory Dominic Grieve savages @theresa_may for not putting major treaty change - Brexit terms - to Commons for voteTory Dominic Grieve savages @theresa_may for not putting major treaty change - Brexit terms - to Commons for vote
Chris Bryant talking the Ponsonby rule, Dominic Grieve talking about the convention of an "affirmative vote" in PArliament for a treaty...Chris Bryant talking the Ponsonby rule, Dominic Grieve talking about the convention of an "affirmative vote" in PArliament for a treaty...
In English - this is the sound of the @HouseofCommons taking back control. Incrementally. https://t.co/3aE2CC2dmtIn English - this is the sound of the @HouseofCommons taking back control. Incrementally. https://t.co/3aE2CC2dmt
Andrew Sparrow is live-blogging the whole thing:Andrew Sparrow is live-blogging the whole thing:
1.27pm BST1.27pm BST
13:2713:27
We know that the pound hit a record low last night, but which way might it move next?We know that the pound hit a record low last night, but which way might it move next?
Kallum Pickering, senior UK economist at German bank Berenberg, suggests sterling could suffer fresh losses if Brexit negotiations get off on the wrong foot.Kallum Pickering, senior UK economist at German bank Berenberg, suggests sterling could suffer fresh losses if Brexit negotiations get off on the wrong foot.
The latest leg down for sterling reflects the shift in market expectations towards a hard Brexit following recent comments from Prime Minister May and her cabinet.The latest leg down for sterling reflects the shift in market expectations towards a hard Brexit following recent comments from Prime Minister May and her cabinet.
Has sterling found a bottom? That depends on how Brexit negotiations play out. If the UK and EU clash noisily in the forthcoming negotiations or if the UK goes for a ’hard Brexit’, a risk we cannot rule out, sterling is likely to continue to sink further.Has sterling found a bottom? That depends on how Brexit negotiations play out. If the UK and EU clash noisily in the forthcoming negotiations or if the UK goes for a ’hard Brexit’, a risk we cannot rule out, sterling is likely to continue to sink further.
But...But...
If the UK and the EU agree to part ways in an amicable manner, and if the UK secures good terms for post-Brexit trade, sterling is likely to rebound along with the UK economic outlookIf the UK and the EU agree to part ways in an amicable manner, and if the UK secures good terms for post-Brexit trade, sterling is likely to rebound along with the UK economic outlook
1.10pm BST1.10pm BST
13:1013:10
Confidence among Britain’s food industry has been rattled since the Brexit vote, a new survey has found.Confidence among Britain’s food industry has been rattled since the Brexit vote, a new survey has found.
Although the weak pound should help exports (making Mr Kipling cakes, Marmite and Scottish shortbread more affordable abroad), manufacturers are worried that they could face new tariffs once Britain leaves the EU.Although the weak pound should help exports (making Mr Kipling cakes, Marmite and Scottish shortbread more affordable abroad), manufacturers are worried that they could face new tariffs once Britain leaves the EU.
12.45pm BST12.45pm BST
12:4512:45
The EU referendum vote has forced international investors to get up to speed on the intricacies of the UK parliament, the EU single market, the untested article 50, and scrutinise every Brexit-related headline out of London and Brussels.The EU referendum vote has forced international investors to get up to speed on the intricacies of the UK parliament, the EU single market, the untested article 50, and scrutinise every Brexit-related headline out of London and Brussels.
The Financial Times columnist Janan Ganesh suggests markets should calm down....The Financial Times columnist Janan Ganesh suggests markets should calm down....
Markets foolish to parse govt statements for clues. There's no plan. Each panic-inducing remark gets toned down. May as well ask your cat.Markets foolish to parse govt statements for clues. There's no plan. Each panic-inducing remark gets toned down. May as well ask your cat.
12.43pm BST12.43pm BST
12:4312:43
An important point:An important point:
May refuses to promise MPs a vote on Brexit before article 50 is invoked - Only promising debate - V big differnc - https://t.co/T9HYpxKWrfMay refuses to promise MPs a vote on Brexit before article 50 is invoked - Only promising debate - V big differnc - https://t.co/T9HYpxKWrf
12.22pm BST
12:22
The pound has kicked on a little, back towards $1.23, after prime minister Theresa May told MPs she will aim for “maximum access” to the EU single market.
May says she is determined to achieve the “right deal for the UK.....operating in and trading with” the European market.
Labour leader Jeremy Corbyn, though, criticised the government for lacking a clear Brexit plan.
Our Politics Live blog has full coverage of Prime Minister’s Questions:
11.55am BST
11:55
This chart confirms that the pound plunged to a record low last night:
Trade-weighted sterling hit a record low on Tuesday pic.twitter.com/kiMSLJbCI2
11.53am BST
11:53
Sterling hit lowest ever level yesterday
Newsflash: Yesterday’s brutal selloff drove the pound down to its lowest ever level against a basket of other currencies.
New data from the Bank of England shows that trade-weighted sterling crashed through its previous seven-year low during last night’s trading, to depths not seen before.
This index values the pound against a group of other currencies including the US dollar, yen, and euro.
And it hit 73.383, on the Bank’s index, tipping through the 73.495 plumbed in December 2008 as Britain crashed into recession and several banks were bailed out.
This morning’s rally means the pound has now pulled back from this nadir, but it’s still a serious warning about the impact that Brexit has had on the pound.
It’s still close to a near-31 year low against the US dollar, and close to a six-year low against the euro today.
Mike Bird of the Wall Street Journal has a good take:
The Bank of England’s broad effective exchange rate index for the pound shows that the currency is now worth less than it was at the height of the 2008-09 financial crisis, or in the aftermath of Black Wednesday, when sterling left the European Exchange Rate Mechanism.
Given the pound has declined from its once strong position throughout the last century, the current level means it has never traded lower against its trading partners.
Her majesty's bitcoin, the north Atlantic peso, now at its lowest level ever (like, ever ever) https://t.co/37rK7xClM0 pic.twitter.com/Pub3CCCBoI
Reuters has more details too:
Trade-weighted sterling index hits record low on Tuesday- BoE
Updated
at 11.57am BST
11.45am BST
11:45
While I was watching Jon Cunliffe, Lloyds Banking Group announced it is cutting more than 1,300 jobs.
Lloyds Banking Group is cutting 1,340 jobs according to unions
11.44am BST
11:44
Sir Jon Cunliffe’s session at the House of Lords has now ended.
Here are the key points from the Bank of England deputy governor:
11.30am BST
11:30
Q: What are the prospects of the UK continuing to have influence over the regulation of financial services in the EU, and globally, after Brexit?
Sir Jon Cunliffe says the UK won’t have influence from inside on the making of EU regulation, once it has left.
We will necessarily lose influence, if you’re not an EU member you can’t be inside the machinery making EU law.
But he expects the EU to maintain its commitment to international standards.
I hope, presume, and will devote considerable effort to ensure Britain still influence those global standards, Cunliffe adds.
11.18am BST
11:18
Q: Would the Bank of England ever ‘mark the card’ of ministers over Brexit?
Cunliffe says the Bank doesn’t have that power, but it has a responsibility to monitor the UK financial system and make its views known.
11.15am BST
11:15
Onto the Brexit buzzword - uncertainty.
Q: How will the Bank respond if politicians make pronouncements in the run-up to Brexit?
Cunliffe repeats that markets have a general problem with political uncertainty, and there will be a lot of political noise around Brexit.
The Bank’s Financial Policy Committee is assessing the financial stability implications of Brexit, and will report on them through its regular publications, in the usual way. Ditto for the Monetary Policy Committee.
Q: Is there a contradiction that banks want certainty, but they also want Brexit resolved quickly?
Cunliffe says that:
No matter how it’s arranged, we just need a smooth and orderly progression from where we are to where we’re going, wherever that is, so firms can plan and execute those plans.
There are lots of ways we could proceed, but they are political choices.
Q: But take Nissan. They won’t wait three years before taking an investment decision....
That’s true of financial firms as well, Cunliffe says. They have have shareholders... and if there’s not certainty they may need to execute plans and prepare for the future anyway.
You could reach a tipping point, and go ahead before you know the full details of Brexit.
11.08am BST
11:08
Cunliffe warns of problems if London loses euro clearing
Q: Is there a serious risk that the euro clearing market could move out of London?
Sir Jon Cunliffe says he’s spent most of his career on this subject, and apologies for giving a long answer (don’t worry, Sir Jon, this stuff matters....)
He says it’s unusual to see heads of state talking about something as technical as ‘euro clearing’. So there’s a political significance to this, which may determine the outcome.
[Background: French president Francois Hollande said in June that the UK won’t be able to keep its euro clearing business after Brexit].
But on the technical issue -- euro clearing relates to the process by which banks clear complex derivative contracts priced in euros.
He explains that after the 2008 financial crisis, regulators insisted that derivatives contracts are cleared centrally, so that they could see the state of play, and if any firms are getting in trouble.
You avoid what happened in the financial crisis, where as the prices of assets move quickly, counter-parties make margin calls on other counter-parties, and the situation deteriorates quickly.
Cunliffe says he was at the G20 meeting in Pittsburg when regulators decided to do this, and it was the right thing.
But it needs central clearing, so you can net the risks.
In other words, financial firms can ‘net’ off their margin calls, balancing contracts where are up, or down, and only post the balance. That reduces the stress in the system, meaning firms won’t have to post as much capital or buy as much insurance.
Cunliffe then, politely, rubbishes the idea that derivative contracts need to be cleared in the jurisdiction of the currency that they are issued in.
Currently, London clears contracts priced in euros, dollars, and yen (for example).
It you make multi-currency infrastructure impossible, then the cost of clearing derivatives will go up.
And fragmenting the system could create financial stability risks, if the current set-up in London is replaced by several smaller operations.
He says:
I can understand the politics around this, but we’re taking technically about multi-currency infrastructure.
If we’re talking about going to a world where you have to clear in the jurisdiction of issue, then the costs are going to go up in a pretty big way.
Q: So are you saying that it’s unlikely that euro clearing will move out of London to the EU, if it was a rational decision?
I think the system works well now, Cunliffe replies diplomatically.
Updated
at 11.24am BST
10.50am BST
10:50
Cunliffe: City jobs could move to New York after Brexit
City jobs are more likely to move to New York than to Europe, if Britain loses access to the single market, Sir Jon Cunliffe argues.
The Bank of England’s deputy governor tells the House of Lords committee that it’s not plausible that London banks would move their operations to other European capitals.
The current system is simply too complex, and reliant on other industries, so can’t simply be copied.:
I can’t see London’s financial ecosystem being replicated elsewhere in the foreseeable future, in one place in the European Union.
It takes an awful lot of time, human capital, it’s based around the interaction of financial services and other services.
The idea that this ecosystem can be transplanted to Europe in the foreseeable future is highly unlikely.
Cunliffe then cites research showing that a quarter of the value of a ‘transaction chain’ comes from other financial firms who take part in the transaction, and another quarter comes from non-financial companies such as lawyer.
You need those things to be able to work together seamlessly.
And in New York, that already happens. So some services could shift over the Atlantic, Cunliffe suggests.