Pound leaps on Brexit hopes, shares take a breather

LONDON (Reuters) – World shares took a breather on Tuesday having scaled a five-month high, while Britain’s pound charged to a one-month top on renewed speculation that UK Prime Minister Theresa May was being bundled towards delaying Brexit.

Asia’s rally on hopes of a U.S.-China trade deal had run into profit taking overnight and it was a bumpy start for Europe as the pound’s leap to $1.3150 [/FRX] and some poor company news shoved London’s FTSE down as much as 1 percent.

Oil markets were steadied after a blast from U.S. President Donald Trump at OPEC for “too high” prices had triggered the biggest tumble of the year. Bond yields were also drooping but it was the FX moves that dominated.

Pound bulls latched onto reports that May was considering delaying the March 29 deadline for Britain’s exit from the European Union, a day after the main Labour opposition party had shifted towards supporting a second referendum.

As well as its gains against the dollar, the pound was also up nearly half a percent against the euro to a one-month high at 86.31 pence.

The flip-side was a dollar near a one-week low against its main peers, as markets also waited for testimony from Federal Reserve Chairman Jerome Powell that should shine some light on why it has back away so sharply from further interest rate rises this year.