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Pound falls as 'hard' Brexit seen as more likely

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The pound tumbled against the dollar and euro on Tuesday after the British parliament rejected a proposal to delay Brexit.

[NEW YORK] The pound tumbled against the dollar and euro on Tuesday after the British parliament rejected a proposal to delay Brexit.

On a mixed day for global stocks, the trajectory of Britain's departure from the European Union was as murky as ever after a series of votes in parliament that included a rejection of a proposal to order the Prime Minister Theresa May to delay the exit if no new deal with the EU emerged by February 26.

Parliament then went on to vote 317 to 301 in favour of the amendment asking May to replace the deal's so-called backstop provision preventing a hard border with Ireland - a proposal immediately rejected by an EU spokesman.

Near 2130 GMT, the pound was at US$1.3069, down 0.7 per cent compared with Monday night and a similar amount against the euro.

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Boris Schlossberg, a foreign exchange analyst at BK Asset Management, said the EU and British parliament were in a "game of chicken" over terms to avoid a so-called "hard Brexit," where Britain exits the bloc without a deal.

Britain is currently scheduled to leave the union on March 29.

"There is a bigger chance than before than before that we could end up with a hard Brexit," Mr Schlossberg told AFP, adding that such an outcome was still unlikely.

"The risks have increased because time is ticking and nobody seems to have a realistic solution right now."

Earlier, European bourses all finished higher, with London's FTSE 100 index up 1.3 per cent and Paris and Frankfurt also gaining.

US stocks finished mostly lower, with the Nasdaq falling 0.8 per cent ahead of a slew of major tech earnings.

Apple slipped 1.0 per cent in after-hours trading after reporting first-quarter of earnings of US$20 billion, roughly the same as in the year-ago period. Apple also lost 1.0 per cent during the session.

Amazon, Microsoft, Facebook all lost at least two percent during the session ahead of results later this week.

Besides a heavy earnings calendar, investors are anticipating Wednesday's Federal Reserve policy announcement.

The Fed has in recent weeks signaled a cautious approach to lifting interest rates, a key factor in the market's rally since late December.

Markets are also looking ahead the resumption of trade talks between China and the United States.

Some analysts viewed the prospects for a Beijing-Washington agreement as dimming after the US Justice Department on Monday announced criminal charges against Chinese telecommunications giant Huawei.

But Treasury Secretary Steven Mnuchin said the Huawei matter was unconnected to the trade negotiations, adding in a Fox Business interview he expected "significant" progress in the talks.

AFP