Pound Suffers as Johnson Revives Hard Brexit Fears

The British pound was hovering just above a four-month low early Friday in Europe, as fears about Brexit returned to haunt the currency after a month of relative calm.
At 03:00 AM ET (0700 GMT), sterling was at $1.2786, and had fallen to 1.1432 against the euro, on concerns that the U.K. may yet leave the EU without any sort of arrangements in place to cushion the transition.
The pound slipped after Theresa May told party colleagues she would set a timetablefor her departure next month, irrespective of whether her proposed EU Withdrawal Agreement passes in the House of Commons at the fourth time of asking. That vote is pencilled in for the first full week of June, and there is little sign of it succeeding.
Given the pro-Brexit mood among Conservative party members, it’s likely that May will be replaced by a “Hard Brexiteer” more comfortable with the prospect of leaving the EU without a deal. Reports that the former Foreign Secretary Boris Johnson had confirmed he would run for the leadership were directly responsible for much of sterling’s slide on Thursday.
Elsewhere, the dollar has also strengthened again versus the Chinese yuan after Beijing’s rhetoric hardened. The offshore yuan fell to a six-month low of 6.9449, while the official rate rose above 6.90 for the first time since December.
“We can’t see the U.S. has any substantial sincerity in pushing forward the talks,” an opinion column by the state-owned news agency Xinhua said. “If the U.S. ignores the will of the Chinese people, then it probably won’t get an effective response from the Chinese side.”
Figures released earlier this week showed a sharp slowdown in both industrial production and retail sales in April, even before trade negotiations took a turn for the worse.
“If the slowdown in the activity data continues in May and June, China's GDP growth could fall below 6.0% YoY in 2Q19,” said Iris Pang, an economist with ING. However, she noted that the April slowdown may have reflected less urgency on the part of Beijing to provide stimulus to the economy, given that trade talks appeared to be progressing well at the time. That urgency could easily return now, she added.
Despite losing ground against the safe-haven yen, the dollar index, which measures the greenback against a basket of six major currencies, hit a two-week high of 97.708 overnight before retreating to 97.607
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