Sterling rises with no-deal Brexit still considered unlikely

Sterling rose on Wednesday after declines triggered by the UK parliament’s rejection of amendments to delay Brexit as investors bet the government would still avoid exiting the European Union without an agreed trade deal in place.

The pound fell 0.7 per cent on Tuesday after lawmakers voted to demand Prime Minister Theresa May renegotiate the terms of Brexit but rejected an amendment that would have postponed Britain’s scheduled March 29 departure.

However, an amendment that stipulated averting a no-deal Brexit did pass, and analysts said risks of a chaotic Brexit had risen only slightly.

Goldman Sachs, for example, put the chances at 15 per cent compared with an earlier 10 per cent forecast.

By 0830 GMT, sterling had risen 0.3 per cent to $1.3111. It had fallen by about a cent on Tuesday after the vote.

Against the euro, the pound rose around 0.15 per cent to 87.4 pence after a source said on Wednesday that British opposition Labour leader Jeremy Corbyn will tell May to take a hard no-deal Brexit off the table.

The currency had gained before the vote on expectations parliament would approve a deal on time or would extend the Article 50 deadline. Analysts said not much had changed on that front.

The market is still giving a very low probability to a no-deal, said Sarah Hewin, chief Europe economist at Standard Chartered, which still sees chances of hard Brexit at 20 per cent.

Source: Voice of Nigeria