Sterling rebounded from a record low in trade-weighted terms on Wednesday after Britain’s prime minister said she would give MPs some scrutiny of the Brexit process and would seek “maximum possible access” to Europe’s single market.
The pound rose by as much as 1.5 per cent against the dollar and the euro on the announcement by Theresa May concerning a parliamentary debate initially read as handing MPs a substantial opportunity to undermine the “hard Brexit” scenario that has scared investors over the past fortnight.
A hard Brexit is seen as leaving Britain out of European Union’s single market and threatening London’s role as a major financial centre.
The gains eased, however, around midday in London when Mrs May and her Brexit minister David Davis sounded some less concessionary notes in a pair of appearances in parliament. Sterling was trading late on Wednesday at around 90.2p against the euro. Earlier it had risen to 89.6p.
Brief pause
To many dealers and analysts the gains for the pound still looked like just a brief pause after four days which have sent the currency to its weakest on record, according to the trade-weighted index run by the Bank of England.
Against the dollar alone, it remains, at around $1.21, some way from an all time low of just above parity hit in 1985. At one stage yesterday it was over 91p against the euro.
“You could say there was some kind of backtracking to at least allow parliament some greater profile,” said Lee Hardman, currency economist with Bank of Tokyo-Mitsubishi UFJ in London.
“But you would have to be very optimistic to think that it will have a big impact on the process, to expect that it means they will ultimately give parliament greater say.”
Sterling was just 0.8 per cent higher, almost halving its gains on the day to stand just over a cent above Tuesday’s lows of $1.209.
The currency has plunged almost 18 per cent against the dollar since Britain's shock vote in June to leave the European Union.
After a brief period of stability the sell-off has worsened again in the past fortnight on a series of signs that the government would prioritise controls on immigration over access to the European single market.
– (Reuters)
