Sterling traders eye vote on early election after big rebound

Sterling traders
Sterling traders

THE British pound edged lower on Friday after a tumultuous week in which it plunged to three-year lows before rebounding strongly as lawmakers voted to block a no-deal Brexit, making a snap election more likely.

Opposition parties will discuss on Friday how to respond to Boris Johnson’s bid to call a snap election after the prime minister said he would rather die in a ditch than delay the planned Oct. 31 departure from the European Union.

Lawmakers will on Monday hold another vote on a motion on whether to hold an early election.

Opposition parties want to ensure that an election does not allow Johnson to lead the United Kingdom out of the EU without a deal next month.

Sterling fell 0.2 per cent against the dollar to 1.2305 dollar, but it is still far above the sub-1.20 dollar three-year lows hit on Monday.

It has gained more than 1 per cent this week – putting it on track for its best weekly performance since June.

Against the euro the pound dropped 0.3 per cent to 89.76 pence, leaving the British currency close to its strongest level since July 25.

“The main threat to sterling’s recovery is if Johnson’s Conservative party were to win with a majority in an early election.

They could then overturn the legislation requiring them to ask for an extension, increasing the threat of leaving without a deal,” said Mark Haefele, Chief Investment Officer, UBS Global Wealth Management.

Haefele predicted that the pound would weaken to 1.15 dollar or lower in the event of a no-deal Brexit.

While huge uncertainty about the political outlook in Britain remains, investors have taken solace from lawmakers’ determination to block a no-deal Brexit that economists say would be severly damaging for the UK economy.

Expectations for sterling price swings in the months ahead have fallen sharply as the risk of a no-deal exit from the EU receded, with implied volatility gauges back to levels of mid-August after spiking to their highest in 2019 earlier this week. (Reuters/NAN)

– Sept. 6, 2019 @ 12:35 GMT |

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