STERLING made modest gains yesterday as Prime Minister Theresa May flagged a view that no Brexit was more likely than a no-deal departure if Parliament votes today against the draft withdrawal agreement between the UK and European Union.
Mrs May made this point as she attempted to drum up support for her agreement ahead of today’s vote, amid continuing expectations that MPs will reject her deal. This deal involves the UK leaving the single market, and would end free movement of people to and from other countries in the EU.
Jane Foley, foreign exchange strategist at Rabobank, told Reuters: “Theresa May seems to think there is a bigger chance of no Brexit than of no-deal Brexit. Anything that seems to reduce the chances of a ‘hard’ Brexit is something that would provide solace to investors.”
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The Bank of England has warned that a no-deal Brexit, involving a departure from the EU without a transition period, could result in a recession deeper than that triggered by the global financial crisis more than a decade ago. And businesses have proved reluctant to invest, as the March 29 Brexit date looms and major uncertainty remains.
Societe Generale strategist Alvin Tan said: “Chances of a no-deal Brexit have fallen but there remains great uncertainty about the terminal point of this.”
David Madden, analyst at CMC Markets, said the sterling-dollar exchange rate had “experienced low volatility as traders await the key Brexit vote”.
He added: “Theresa May’s deal is very unpopular, and it [is] widely expected to be voted down, but that being said, the pound has largely down, but that being said,
the pound has largely moved higher versus the US dollar since early December."
Mr Madden added: “Volatility is likely to remain low, until the vote is out of the way.”
Sterling was, at 5pm in London last night, trading around $1.2870, up by 0.35 cents on its pre-weekend close.
The pound was also firmer against the euro.
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The single currency was trading around 89.17p at 5pm last night, down about 0.26p on its pre-weekend close.
The pound was trading at around $1.50 in June 2016, just ahead of the result of the Brexit vote.
The single currency was worth less than 77p on June 23, 2016, before the Brexit vote result.
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