Sterling Surges Amid Brexit Deal

Sterling

Sterling steadied on Monday, helped by a weaker dollar and reports that Prime Minister Theresa May was preparing to put her Brexit withdrawal plan to a vote in parliament.

May could put her twice-defeated Brexit divorce deal to a vote in parliament on Tuesday, ITV’s political correspondent said.

Investors are bracing for volatility in the pound with British politics at fever pitch and little clarity on how, when or even if Brexit will ever take place.

Lawmakers in a vote on Monday are likely to wrest more control of Brexit from May after twice rejecting the deal she agreed with Brussels.

Pressure is building on May to give a date for leaving office and few expect her deal to get through parliament in a vote this week because the Northern Irish party propping up her government still opposes it.

“For the time being, we remain cautious. I think the market has priced in the tailwind risk, which was Brexit without a deal, so that’s why GBP is rather stable since the end of last week,” said Claudia Panseri, an equity strategist at UBS Global Wealth Management.

At 1430 sterling was flat at $1.3212. It was also marginally down against the euro at 85.64 pence

The EU has said Britain can have a short delay to Brexit but May must first win parliamentary approval for her withdrawal deal from the bloc.

The delay has not helped the pound much with the currency pressured by renewed fears about Britain leaving the EU without a deal to smooth the transition.

“The extension of the Brexit deadline was shorter than many had hoped and we still have the problem of what type of consensus deal lawmakers can rally around,” said Michael Hewson, chief market analyst at CMC Markets in London.

Monday’s parliamentary votes are aimed at giving lawmakers greater control over what the country does next and could definitively pull Brexit out of May’s hands in the coming days.

A series of “indicative votes” are likely on Wednesday to test the water and see what could be successfully pushed through parliament.

Currency derivative markets signalled a growing caution for the pound, with one-month risk reversals on sterling versus the euro and the dollar at multi-month highs.

An indicator of how bearish or bullish investors are on the outlook of the currency, so-called risk reversals signal that short-term negative bets on the pound are piling up rapidly despite the broader calm in the spot markets.

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