HONG KONG: The pound wallowed near two-month lows Tuesday, unable to sustain a strong recovery from last week’s shock election that saw Britain’s ruling Conservatives lose their majority, throwing the country into uncertainty, days before key Brexit talks.
While Prime Minister Theresa May looked to counter anger within her party by apologising and telling MPs “I got us into this mess, and I’m going to get us out”, there are doubts about her future in Downing Street.
May had called the vote in a bid to strengthen her majority, and her bargaining power, before going into the EU exit talks set for June 19. Now she must rely on the support of Northern Ireland’s Democratic Unionist Party.
Greg McKenna, chief market strategist at AxiTrader, said: “The political uncertainty is unhelpful given Brexit talks are about to begin in the next week.”
He added that “sterling came under renewed pressure as a result” of the newly formed government’s refusal to soften its approach to the discussions. “Why the government wouldn’t use the election for a reset I just don’t know.”
In Asian trade the pound bought $1.2690, up from New York trade but well off levels around $1.29 seen before the election.
The currency’s “near-term direction will continue to be driven by the post-election fallout, but the prospects look increasingly gloomy as the possibility of another Tory leadership vacuum enters the picture at precisely the wrong time for the UK,” said Stephen Innes, senior trader at OANDA.
Fed, Sessions in view
On equity markets, technology firms failed to bounce back from the previous day’s sell-off that was sparked by a rout in the sector on Wall Street Friday. Sony and Sharp were both down in Tokyo while Tencent was marginally up in Hong Kong after Monday’s tumble. Samsung was flat in Seoul.
The losses came after the Nasdaq suffered another slump as Apple and Amazon took a beating, with analysts wondering whether the selling is down to profit-taking or the start of a broad retreat after all US indices hit records last week.
Broader markets fared slightly better after Monday’s steep losses. Tokyo finished marginally lower but Shanghai closed up 0.4 percent and Hong Kong gained 0.3 percent in the afternoon.
Sydney gained 1.7 percent and Seoul jumped 0.7 percent, while Wellington and Taipei were also up.
Traders are now awaiting the end of the Federal Reserve’s latest policy meeting. While another interest rate hike is widely expected, the bank’s post-meeting statement will be scanned for some forward guidance and clues about future movements.
Also, US Attorney General Jeff Sessions is due to testify Tuesday to the Senate Intelligence Committee as it probes Russian meddling in last year’s election and Moscow’s links to under-fire President Donald Trump.
Attention has focused on Sessions as reports swirl that he may have had more meetings with Russian officials during the campaign last year than the two he has informed authorities of.