Markets

Sterling up against euro and dollar on Brexit reassurance

Investors bet no-deal Brexit – the worst case scenario for the currency – can be avoided

The pound was lifted on Tuesday by strong employment data. Photograph: Yuriko Nakao/Bloomberg

Wed Jan 23 2019 - 19:39

Sterling rose to its highest point against the euro since mid-November on Wednesday, simultaneously hitting a 10-week high against the dollar. The move came after Britain's Labour Party said it would back an attempt by MPs to prevent a disorderly no-deal Brexit.

Investors are betting that a no-deal Brexit – the worst case scenario for the currency – can be avoided if parliament exerts greater control over the process.

“Overall the view is parliament doesn’t want a hard Brexit and nor does the EU... and if that’s the case I don’t see how it can happen,” said Justin Onuekwusi, a fund manager at Legal & General Investment Management. “We are neutral on sterling as you have to be quite nimble,” he added.

Sterling strengthened 0.9 per cent against the dollar to $1.3079. It gained 0.8 per cent against the euro to 87.33 pence, it highest since November 14th.

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The pound was lifted on Tuesday by strong employment data which suggested Britain’s labour market remained robust despite an economic slowdown ahead of Brexit.

"Downside risks remain. If the UK were to leave the EU without a deal we would expect the pound to trade as low as $1.15 against the dollar and to reach parity with the euro," said Dean Turner, UK economist at UBS Wealth Management. – Reuters

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