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(FILES) In this file photo taken on October 05, 2017 British one pound sterling coins are arranged for a photograph in central London on October 5, 2017.
daniel sorabji/Agence France-Presse/Getty Images
The pound tumbled against major currency rivals on Friday, as Brexit negotiations between the U.K. and Brussels appeared to be nearing collapse.
Sterling weakness was helping out the FTSE 100 UKX, +0.45%, up 0.3% to 6,022.66, allowing it to buck a sluggish session for European markets. The index is up 3.9% for the week up to Thursday, and if that holds, it will be the best weekly return since the week ending June 5.
A weak pound can boost shares of multinational companies earning revenue overseas, as it makes their goods more competitively priced. The pound EURGBP, +0.16% was down 0.2% against the euro, a more than five month low, and a 3.7% weekly loss. Against the dollar, the pound GBPUSD, +0.15% was up 0.2% to $1.2826, but faced a 3.5% loss for the week.
Sterling losses have come after the U.K. government’s move to amend parts of its withdrawal agreement with the European Union that it signed last year. It chiefly relates to the circulation of goods between Northern Ireland and Great Britain. The EU is demanding the U.K. scrap those plans by the end of the month or put trade talks at risk.
“Following the recent development on Brexit negotiations, we are now agnostic on the ultimate outcome of the negotiations – no deal is now as likely as a deal, in our view,” Benedicte Lowe, cross asset strategist at BNP Paribas in London, told clients in a note.
The U.K. announced its first post-Brexit trade treaty, with Japan on Friday,
“While the first major deal is welcome news, it is only a broad agreement on a ministerial level and only boosts trade with Japan by 15.2 billion pounds,” said Edward Moya, senior market analyst at OANDA in New York, in a note to clients.
Currency strategists said the pound remains vulnerable. “For now, the U.K. and EU are at a stalemate with time working against them, no deal is a real possibility and 1.20 in GBP/USD or 0.98 in EUR/GBP are still very possible if a no-deal Brexit were to happen,” said Jordan Rochester, currency strategist at Nomura, in a note.
The Brexit distraction made it tough to focus on some upbeat news for the U.K. economy as data showed growth expanding for the third-straight month.
Shares of Rio Tinto RIO, +1.88% RIO, -1.67% climbed 1.6%. The miner said its chief executive officer, Jean-Sébastien Jacques, will resign over fallout from the destruction of ancient rock shelters in Australia. The caves were blown up to expand the company’s iron-ore operations.
“The negative response from various shareholders following an inquiry into the incident highlights how investors are no longer standing for bad behavior,” said AJ Bell investment director Russ Mould.
