ECONOMY

Sterling rises as May faces pressure to go for soft Brexit

The pound gained 0.1 percent to 85.980 pence per euro. (File photo: AFP)

The British pound rose on Monday as investors prepared for parliament to vote on a series of Brexit options, with some hoping that the current uncertainty will end in a softer Brexit than Prime Minister Theresa May’s defeated withdrawal agreement.

May’s deal was voted down for a third time by lawmakers on Friday, sending sterling plunging to below $1.30.

But the British currency has held at or above that level since, suggesting some investors have priced out the prospect of Britain crashing out of the European Union without a deal and instead expect a long delay to the exit or Brexit to emerge eventually where closer ties are maintained to the trading bloc.

“There is a growing expectation that a (House of) Common’s majority could coalesce around a softer Brexit that includes a custom’s union but she is facing more threats from cabinet members to resign if she decides to pursue a softer Brexit,” MUFG analysts said.

Sterling rose 0.4 percent to $1.3083, also finding support from better-than-expected manufacturing survey data.

The pound gained 0.1 percent to 85.980 pence per euro.

The analysts at MUFG said that while a no-deal Brexit on April 12 remained a risk for the pound, an emergency EU summit on April 10 could - if British lawmakers cannot agree anything this week - see a long delay to Brexit.

Parliament will vote on different Brexit options on Monday and then May could try to bring her deal back to a vote in parliament as soon as Tuesday.

But May’s government and her party remain in open conflict.

Marshall Gittler, a strategist at ACLS Global, said he considered a no-deal Brexit “as a higher possibility, even though it’s officially been ruled out, simply because I don’t see any of the other endings as particularly possible.”

The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index in at a reading of 55.1 for March, above the 51 level forecast by economists polled by Reuters.

The survey showed that factories in Britain stockpiled for Brexit at a frenzied rate last month, pushing manufacturing growth to a 13-month high.

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Last Update: Monday, 1 April 2019 KSA 13:09 - GMT 10:09
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