Traders mull extent of huge sterling rally, if Brexit deal were agreed
Irish shares followed the volatile fortunes of sterling as markets focused on whether Boris Johnson will secure political support for any Brexit deal.
Reflecting the uncertainty, Irish bank shares were mixed, with AIB shedding 2.7% but keeping most of its huge gains of recent sessions, while Bank of Ireland rose 1% and Permanent TSB climbed 3.5%.
For over three years, Irish shares have faced the Brexit storm, hit by the slump in sterling and, more recently, by fears that Britain would crash out of the EU.
Any rebound in the UK currency could propel Irish shares higher, however.
Despite the uncertainty over whether any deal will be approved by MPs, economists have mulled by how much sterling could rally should the pathway be cleared to a deal.
Against the euro, the pound was 0.2% stronger on the day at 86.16 pence - but off five-month highs hit earlier -- and traded at $1.284.
Sterling trading volumes have surged in recent days. Earlier this week, investors bought and sold more pounds than on any single day since November 2018, according to Refinitiv data.
Capital Economics UK economist Thomas Pugh said that if a Brexit deal is signed and ratified then sterling could rise further over the next few weeks or months, to $1.35.
It could surge further to $1.40 next year, should the Bank of England hike interest rates.
Justin Doyle at Investec Ireland Treasury said that the rise of sterling against the euro in recent sessions means that markets are betting on a deal "before the week is out".
He said a move to around the low range of 85 pence or mid-range of 84 pence "is now not beyond the realms of possibility on any official, joint confirmation of a deal that appeared so elusive in recent weeks".
A move for sterling to the mid-range of 84 pence "will be good news for hard-pressed Irish exporters without a hedged position who have had to endure prolonged trading periods", he added.
And new surveys again highlighted the risks facing the Irish economy -- north and south -- should a deal prove elusive.
Visa said its Irish survey of consumer spending -- which tracks all types of payments on cash, cheques, and by electronic means, suggested households spent less last month, as fears of a crash-out Brexit increased through September.
Spending on clothing and footwear fell sharply, but expenditure on restaurants and bars and recreation rose.
And the Northern Ireland Chamber and BDO said its quarterly survey showed the North's economy was close to slipping into recession, as business and consumers were buffeted by Brexit fears.
"The survey brings to light serious concerns around economic and particularly political instability in Northern Ireland and the UK, with almost four in five local business leaders believing that a recession in Northern Ireland is likely in the next six to 12 months," according to the survey.
Meanwhile, the Association of Chartered Certified Accountants, or Acca, said its Global Economic Conditions Survey showed a dramatic fall in confidence in the Republic.
"A no-deal Brexit would harm Ireland more than any other EU country, given its trade integration with the UK economy," said its chief executive Michael Taylor.
