Pound hits five-week high as no-deal Brexit fears ebb - as it happened

Sterling is rallying as City investors anticipate a Brexit delay, and an election

• Latest: Sterling rallies on no-deal Brexit hopes
• Pound goes up as Johnson's problems mount
• City hopes no-deal Brexit can be avoided
• Delay could push pound over $1.30, says UBS
• Election likely

3.08pm BST

Time for a recap

Related: US and China agree to reopen trade talks in October

Stocks are surging today, and are getting close to all-time highs again https://t.co/o1YmnqdSGX pic.twitter.com/Iq3wj83eZO

3.00pm BST

Andrew Gwynne MP has summed up Boris Johnson's week -- with a list of events that have generally pushed the pound higher.

Quite a week for Boris Johnson

Tuesday
" Loses Majority
" Loses Commons Vote
" Loses further 23 MPs

Wednesday
" Loses temper
" Loses several Commons Votes
" Loses temper again
" Loses GE vote
" Loses temper again

Thursday
" Loses brother, Minister and MP

2.53pm BST

Ouch! Growth across America's service sector companies has slowed to a three-year low.

Data firm Markit says there was "a loss of momentum across the U.S service sector" last month," with new orders slowing and demand from overseas falling.

US Markit Services PMI Aug F: 50.7 (est 50.9, prev 50.9)
- Composite PMI Aug F: 50.7 (prev 50.9)

"US businesses reported one of the toughest months since the global financial crisis in August, with growth of output, order books and hiring all slowing amid steep falls in both export and business confidence.

"Only on two occasions since the global financial crisis have the US PMI surveys recorded a weaker monthly expansion, and these were months in which business was hit by the government shutdown and bad weather in 2013 and 2016 respectively. This time, trade wars and falling exports appear to be the main drivers of weakness, exacerbating fears of a broader economic slowdown both at home and globally.

2.37pm BST

#Pound roars back to life as #BorisJohnson loses control of #Brexit; #GBPUSD rebounds from 3yr low to move above $1.23; House of Commons showdown keeps investors on high alert; PM set to address nation https://t.co/J8W8Fxv7TO#FMcy #Sterling pic.twitter.com/nKu4YXM153

2.15pm BST

Sterling bouncing back like a yo-yo as JoJo dumping BoJo all but means no go on No Deal Brexit.

P.S. Only way PM can leave the EU by 31 October is to get a Theresa May-like deal. Surely No 10's best strategy now to get on with it... pic.twitter.com/OTuBQviIHs

1.54pm BST

The strength of the pound has dragged down the London stock market today.

The FTSE 100 has lost 50 points, or 0.7%, to 7261. A stronger sterling hits the value of multinational companies with large earnings in foreign currencies.

1.40pm BST

Rabobank analyst Jane Foley says the pound acting like a "tidy barometer" for the odds of a no-deal Brexit.

She told AFP:

"Just as fears of a no-deal Brexit pushed the pound below $1.20 earlier this week, expectations that MPs will succeed in delaying Brexit beyond October 31 have resulting in a relief rally back to $1.23.

"The pound is clearly not out of the woods with political uncertainty still at very elevated levels - but the risk of a disorderly Brexit next month at least looks set to be pushed off the table."

1.27pm BST

Just in: America's companies created more jobs than expected last month - a good sign for the global economy.

The private sector payroll rose by 195,000 last month, stronger than the 140,000 which Wall Street expected.

ADP in August came in hot at 195,000 well over the 149,000 expectation and July's 156,000. The 3-month moving average in July was 95,000. It is now 151,000. Bodes well for Friday's NFP

1.08pm BST

Sterling's travails isn't doing much for the Conservative Party's reputation for economic competence.

John Gapper of the FT speculates that a Tory win at the next election could trigger a sterling crisis (as it would allow them to drive through a no-deal Brexit).

One unusual prospect for the next general election -- the pound plunges if the Conservatives win a safe majority

Bad news for Boris Johnson is good news for the pound; Sterling jumps above $1.23 on Thursday, notching up more than 3 per cent as investors become more convinced that a no-deal Brexit might be averted.

12.53pm BST

Some City experts are warning that the pound's recovery may not last.

Dutch bank ING says:

"A UK election now looks inevitable - the only question now is 'when'. However, the chances of a 'no deal' Brexit on 31 October appear to have receded, but there are still ways it could happen, and given the outcome of an election looks deeply uncertain, despite the Conservatives' lead in the polls, the rebound in sterling is unlikely to have legs."

Sterling continued its strong recovery into today as the immediate threat of a No Deal Brexit has been removed by the latest parliamentary maneuvers, as parliament will likely get its delay to avoid an October 31 No Deal (key question: what will the EU terms be for that delay?) and Boris Johnson's attempt to call for snap elections in mid-October was defeated.

There are still too many scenarios from here to signal the all clear - an election scenario that serves as a referendum on Brexit still presents the risk of an eventual No Deal.

The #sterling comeback has steepened as the market discounts the risk of immediate #Brexit chaos risk, even if the enthusiasm may eventually prove misplaced. Read more: https://t.co/P5cHBBYP6X by @johnjhardy #SaxoStrats #FX pic.twitter.com/4IZedcKFIs

12.30pm BST

The pound is the best-performing major currency against the US dollar this week, the eagle-eyed Financial Times points out

The FT says:

Sterling rose above $1.23 on Thursday, notching up more than 3 per cent of gains against the dollar from the start of the week as investors cheered repeated blows to Boris Johnson's attempts to push through a no-deal Brexit.

The pound hit a day's high at $1.2332 in European trading hours after Conservative MP and brother of the UK prime minister Jo Johnson quit his party, in the wake of Wednesday night's vote in parliament that aims to thwart the prime minister's promise to leave the EU on October 31 "do or die".

British pound zips higher as Boris Johnson faces repeated blows. Great chart from FT this morning. https://t.co/arCaDWbULe via @FinancialTimes pic.twitter.com/iRw3NtxduG

12.23pm BST

UBS Wealth Management predict sterling could surge back to $1.30 if Brexit is delayed beyond October.

Their chief economist, Dean Turner, told clients that the 'Benn bill' blocking a no-deal Brexit is likely to be approved soon. saying:

Sterling has been buffeted by the frenetic pace of events in Parliament over the last couple of days. Removing the immediate threat of a no-deal Brexit has helped the pound recover some of its recent weakness.

If, as we expect, Brexit is delayed until January 2020 and an election is held after October, we would expect this recovery to continue.

We have long been of the view that the UK faces an election at some point before the final decision on Brexit is made. We stick to this view now.

When the election does come, it is only then that will we have greater clarity on how the Brexit saga will end.

12.19pm BST

Sterling has been moving inversely to Boris Johnson's authority this week.

It fell on Monday as government sources revealed the PM was planning an election on October 14, hitting a three-year low below $1.20 on Tuesday morning.

12.00pm BST

The pound has also rallied against the euro, to a one-month high.

Sterling is trading at a1.117, its highest level since 26 July (a few days after Boris Johnson won the Conservative leadership battle)

11.52am BST

Some City investors are confident that Brexit will delayed until next year.

Bloomberg reports:

The pound is rallying after Parliament tore up U.K. Prime Minister Boris Johnson's Brexit strategy and denied his request for a snap election, tempering fears of further political turmoil, reports Bloomberg.

"My expectation is Brexit is delayed until Jan. 31 with an election after the initial deadline and before the end of January," said Neil Jones, head of currency sales for financial institutions at Mizuho Bank Ltd.

Pound is looking jo-vial: https://t.co/NG8NhjV0AE via @markets pic.twitter.com/NCDlFx8KoV

11.35am BST

As @BorisJohnson's brother @JoJohnsonUK announces his resignation, pound hits highest level since July. Now up above $1.23 vs US dollar pic.twitter.com/WLZdKnb63T

11.35am BST

The pound hit its highest level in five weeks after Boris Johnson's own brother announced he is stepping down as a minister and an MP.

In a jaw-dropping tweet, Jo Johnson says he has been wrestling with the tension between family loyalty and the national interest!

It's been an honour to represent Orpington for 9 years & to serve as a minister under three PMs. In recent weeks I've been torn between family loyalty and the national interest - it's an unresolvable tension & time for others to take on my roles as MP & Minister. #overandout

Related: Brexit: Jo Johnson, brother of Boris Johnson, to stand down - live news

11.26am BST

The pound is moving inversely to Boris Johnson's grip on power.

The weaker his government looks, the strong sterling becomes.

It is all about politics in the markets at the moment. As the Boris Johnson government has progressively lost control of the situation, so sterling has rallied.

It now looks more likely that a coalition of rebel Conservative MPs and opposition parties will take a no deal Brexit off the table with legislation, which was what the market was hoping for.

11.23am BST

Sterling has now surged by 2% since the start of trading on Wednesday, Reuters reports.

That's its best two-day performance in 10 months!

11.05am BST

Update: The pound has just hit $1.2318, its highest level against the US dollar in five weeks.

10.59am BST

Sterling is bouncing back from its slump earlier this week, as efforts to prevent a no-deal Brexit next month gather pace.

The pound has just smashed through $1.23, up half a cent today. That's the joint-highest level in five weeks.

#Brexit #forex update:

the #pound is rallying again as #traders of the City start to bet on a possible #BorisJohnson defeat on #NoDealBrexit querelle. #GBPUSD 1.2272 +0.0022 (+0.18%)#trading @graemewearden

1/2 The pound has enjoyed a strong bounce in the past couple of days as parliament has wrestled control of the Brexit process and looks set to pass legislation that would prevent a no-deal. Still lots of political positioning going on and no doubt many twists and turns to come..

2/2 but the simple fact is that the chances of a no-deal Brexit have receded of late and this has provided some support to sterling. Price now back at the 23.6% Fib of the larger declines from the early May high. #GBPUSD pic.twitter.com/R8Y0v4mFOR

10.01am BST

Europe's 'fear index', which measures volatility across the markets, has dropped to its lowest point since 1 August.

That shows traders are more optimistic about a trade breakthrough in October -- despite warnings to be cautious, given previous hopes have been dashed.

"trade talk optimism:" talks now pushed to oct pic.twitter.com/R03i5RJJrr

9.50am BST

Germany's government has blamed the trade war for the slump in factory orders this summer.

Berlin's economy minister says:

"New orders for industry have overall made a weak start to the third quarter.

"Given still-smouldering international trade conflicts and restrained business expectations, there is no sign of a fundamental improvement in the coming months."

9.11am BST

The slump in German factory orders raises the risk that Europe's largest economy is in recession.

German GDP fell by 0.1% in April-June, and there's little sign of a bounce-back in July-September.

Foreign orders from outside the eurozone fell by a dramatic 6.7% MoM, showing once again Germany's exposure and sensitivity to the ongoing trade conflicts and increasing global uncertainty.....

Since the start of the year, domestic orders have actually dropped more than foreign orders, suggesting that global woes have reached the domestic economy.

Ouch! German factory orders sink, raising risk of recession. Demand fell 5.6% in Jul (YoY), 2.7% (MoM) exceeding the estimate for 1.4% decline. Manufacturing slump drags on as global trade tensions rise. https://t.co/hmxX8qsgVS pic.twitter.com/U4d9yeemYy

German industry is suffering the worst slump since the financial crisis. Ailing global trade and elevated uncertainty have been obvious drags. But the looming no-deal Brexit and especially the car sector's malaise were the key triggers of German industry's historic underperformance relative to European peers.

The latest surveys provide no hope of a swift rebound in global trade. Moreover, there's no clear sign that uncertainty stemming from no-deal Brexit risks and US trade policy will abate, so prospects of a manufacturing rebound are dim.

9.03am BST

A trade war breakthrough can't come soon enough for Germany.

New figures show that German factory orders fell by 2.7% during July, nearly twice as much as economists expected. On an annual basis, orders were an alarming 5.6% lower than a year ago.

Domestic orders decreased by 0.5% and foreign orders fell by 4.2% in July 2019 on the previous month. New orders from the euro area were up 0.3%, new orders from other countries were down 6.7% compared to June 2019.

8.35am BST

Just in: China's commerce ministry has told reporters that the overnight phone call with top US officials went "very well".

Spokesman Gao Feng explained that China opposing escalation in the trade war, and will try to make "real progress" when they visit US in October.

China Commerce Ministry Asked About Trade Talks With US, Says Will Strive To Achieve Real Progress During High Level Meeting In Oct

8.25am BST

Europe's stock markets have hit their highest levels in a month, lifted by trade war hopes.

Here's the early moves:

On trade - we're getting more jaw jaw, but just as much war war as before.

The news of face-to-face high-level talks between the US and China next month has been seen as a positive but needs to be taken with a good dose of salt. It wasn't that long ago the market was rallying as we thought a deal imminent, now it's moving on nothing more than confirmation of talks.

8.13am BST

The chances of a US-China trade deal anytime soon are thin, warns Ipek Ozkardeskaya, senior market analyst at London Capital Group.

She suspects Donald Trump could be tempted to inflame the situation, to encourage US central bankers to cut interest rates.

With only a slim chance of a trade deal, all investors ask is at least the continuation of the trade talks.

It is uncertain whether Trump would attempt to cool down the trade war moving into the presidential election year, or he would continue fanning the flames and using it as a tool to exercise an increased pressure on the Federal Reserve for lower interest rates

8.01am BST

Japan's stock market has hit its highest level in a month, on hopes that the US-China trade war could be easing.

The lift in risk sentiment appears mitigated by the concern that the latest positive developments surrounding the US-China trade impasse may prove fleeting and do not yet fully nullify the downside risks to the global economy.

In order for risk sentiment to push significantly higher, markets will need to be shown material signs that US and China are indeed drawing closer to a meaningful and lasting trade deal. Existing tariffs need to be dismantled in order to alleviate pressures on the global economy.

7.45am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

"They agreed to hold meetings at the ministerial level in Washington in the coming weeks.

In advance of these discussions, deputy-level meetings will take place in mid-September to lay the ground work for meaningful progress.

China and US will hold the 13th round of trade negotiations in Washington in October, the People's Daily said. => RISK ON

European Opening Calls:#FTSE 7339 +0.38%#DAX 12135 +0.91%#CAC 5580 +0.86%#MIB 21968 +1.06%#IBEX 8933 +0.87%#STOXX 3482 +0.89%