Sterling falls on further Brexit uncertainty

Asset managers and currency traders have reacted negatively to further dithering over Brexit by the UK parliament which last night voted down an amendment that aimed to prevent a “no-deal” Brexit.

The vote led to sterling falling from 1.32 to the US dollar to 1.305 after the vote. Despite a slight rally today to 1.31, Jordan Hiscott, chief currency trader at Ayondo Markets, said that “given the news I still feel it’s trading with an alarming bid tone”.

The House of Commons voted to give prime minister Theresa May two further weeks to save her Brexit deal after she pledged to return to Brussels and demand changes to the Irish backstop.

Within minutes of the result, however, the EU said it would not reopen negotiations over the UK’s withdrawal agreement.

Hiscott said that the vote by UK politicians not to extend the deadline for the UK’s departure date of March 29 had dramatically increased the possibility of a no-deal Brexit.

“The positive coverage of last night’s Brexit Amendment vote is perplexing,” he said. “On the face of it, Theresa May has indeed secured a victory of sorts but the EU has already repeatedly said that the current deal is the best they can offer, and the issue of the Irish backstop is not up for negotiation.

Bethany Payne, global bonds portfolio manager at Janus Henderson, said: “While a no deal scenario is still unlikely, these developments increase the risk of accidentally leaving the EU without a deal and plans may intensify from both sides to manage that outcome.”

At an event on Monday hosted by Funds Europe and organised by SGG, pro-leave economist Roger Bootle and remain campaigner Gina Miller both hit out at the British government’s negotiating skills over Brexit.

©2019 funds europe

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