Sterling up on report of delay in Brexit deadline

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The pound jumped to a near four-week peak against the dollar on Tuesday on reports of a delayed Brexit deadline, and the safe-haven yen moved off the weakest seen this year as a drop in U.S. equity futures checked investors’ risk appetite.

Sterling spiked to its highest against the U.S. currency since late January after Bloomberg News reported that British Prime Minister Theresa May was considering delaying the March 29 deadline for U.K.’s exit from the European Union.

The pound was last up 0.4 per cent on the day at 1.3143 dollar, sitting just below a session high of 1.3149 dollar, its highest since Jan. 31.

“Delaying Brexit for a few months, which the E.U. is not united on, just kicks the can down the road,” said Michael Every, Hong Kong-based senior Asia-Pacific strategist at Rabobank, in a note.

“Indeed, one could argue that by delaying to May, for example, the odds of ‘hard Brexit’ rise further as at that point any further delay would mean the UK would have to stay in without any E.U. Parliamentary representation – which clearly cannot work,” he said.

The Sun newspaper reported May will propose formally ruling out a “no-deal” Brexit scenario which could potentially lead to the delaying of UK’s exit from the E.U. by months.

The dollar index, which measure the greenback versus a basket of its major rivals, was 0.1 per cent lower at 96.329.

Traders are eyeing a slate of data due in the second half of the week for fresh cues on the health of the global economy, including manufacturing activity figures from China and the United States and revised U.S. fourth quarter gross domestic product figures.

Investors are also looking to the Federal Reserve’s latest view on the economy and monetary policy.

Fed Chairman Jerome Powell will testify before the Senate Banking Committee later on Tuesday, in the first of a two-day appearance before lawmakers.

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