The pound edged up on Wednesday after turbulence following the defeat of British Prime Minister Theresa May’s deal for leaving the European Union, but investors expect more volatility ahead of additional Brexit proceedings.
On Tuesday the British Parliament rejected May’s deal to exit the European Union for a second time, deepening the country’s political crisis days before the planned departure date on March 29. Lawmakers will vote later today on whether Britain should quit the trading bloc without a deal. If such a “no-deal” exit plan is rejected, another vote will be held on Thursday on whether to extend the March 29 departure date.
“The parliament is likely to reject a ‘no-deal Brexit’ plan, and the March 29 exit date subsequently being extended now looks to be a distinct possibility. The pound is stabilizing on such expectations for now. Considering how sensitive the pound is to headlines, we could see the currency fluctuate again if there is an extension of exit deadline.”
British pound was up 0.2 percent at $1.3089 and stuck to a narrow range. The currency had lost 0.65 percent on Tuesday, when it fluctuated widely between $1.3290 and $1.3005.
Even if Britain decides to extend the Brexit deadline, the question will move quickly to the length of the extension it wants and what it plans to accomplish within that period.
Trader Georgi Bozhidarov