The pound has fallen by up to a cent against the US dollar after financial markets gave their first reaction to Saturday’s events in parliament that saw MPs demand a further Brexit delay.
The decision, by the government, to pull a vote on Prime Minister Boris Johnson‘s Withdrawal Agreement in the wake of the amendment saw sterling give up some of its gains of the past week.
Then, the currency clawed back 5% of its value against the greenback as investors saw a marked reduction in the likelihood of a no-deal Brexit on 31 October – given the PM’s progress in Brussels. UK-focused shares also recovered some lost ground.
However, the pound slipped from $1.2971 – a five month high – at Monday’s open in Asia to as low as $1.2875.
It also fell by more than half a cent against the euro to €1.1558.
The fact the Commons Speaker John Bercow could refuse the government the opportunity to put the Withdrawal Agreement to MPs on Monday was seen as adding support to the UK currency as rebels and opposition party MPs fight for a delay.
Ipek Ozkardeskaya, senior market analyst at London Capital Group, said of the early deals: “So far, pound traders are content that a disorderly Brexit will likely be avoided in two weeks.
“Yet an early general election and maybe another Brexit referendum are on the UK’s political agenda for the coming months.
“Therefore, cable could give back its recent gains along with the fading hopes of an imminent Brexit agreement.”
As sterling traded a shade above $1.29, the FTSE 100 opened positively – with banking and housing stocks leading the way.
It was 0.3% higher at 7172 while the FTSE 250 was down fractionally.
While financial markets continued to hold the view that a no-deal scenario was unlikely, business groups expressed nerves that such a prospect had not yet been taken off the table.
Adam Marshall, director-general of the British Chambers of Commerce said: “While the parliamentary drama continues, in the real world businesses wait anxiously for a clear outcome.
“In the coming days the onus is on the government to answer the many questions businesses are posing on the Prime Minister’s deal – and its potential impact on trade, investment, communities and jobs.
“At such a critical moment in the process, the government must give business an iron-clad guarantee that it will not seek to take the UK out of the EU without a deal on 31st October.
“Getting a Brexit deal is far more important than simply getting it done.
“Allowing the UK to slide toward a Halloween no-deal – whether by design or disarray – would be an act of economic and political negligence.
“As frustrating as it would be to many in business, a short extension to unlock a comprehensive solution and a smooth transition is still infinitely preferable to an overnight economic shock.”
The Institute of Directors reported that a poll of its members showed support for Mr Johnson’s deal – with 55% of those questioned backing it.
However, his demand that the UK leave without a deal, if necessary, on Halloween was backed by just 8% of respondents.
Ian Wright, the chief executive of the Food and Drink Federation said: “Everybody has had enough of the Brexit debate.
“It is, though, vital that we didn’t allow the fact that the nation is exhausted to mean we sleepwalk into mistakes that will haunt the UK economy for a generation.”
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