Pound recovers losses after crunch Brexit vote

The pound has recovered some of its losses after Tuesday’s crunch Parliamentary vote where MPs rejected Theresa May’s Brexit deal.

Sterling was trading down 0.25% versus the US dollar at 1.283 and increased 0.29% against the euro at 1.124 after MPs decisively rejected the Prime Minister’s Withdrawal Agreement.

Ahead of the meaningful vote, the pound had been trading down over 1% versus the US dollar at 1.273 and shed 0.3% against the euro at 1.118.

It had been feared that the pound would tank further if Parliament rejected the deal with a large majority.

(PA Graphics)

MPs rejected Mrs May’s Brexit plans by an emphatic 432 votes to 202, throwing the future of her administration and the nature of the UK’s EU withdrawal into doubt.

But markets did not seem to be panicking, with the pound rising in value following the results, which were announced at around 7.40pm.

XTB online trading said: “Traders are seemingly taking the outcome as paving the way for an extension of the Article 50 deadline, rather than increasing the chances of a no-deal Brexit and this has caused the recovery seen in the pound.

“Attention now turns to what happens next with the levels of uncertainty raised once more and moving up to unprecedented heights.”

Seema Shah, global investment strategist at Principal Global Investors, said: “Sterling has pared its earlier loss – this is not surprising.

“It raises the chances of a ‘no Brexit’ or, at the least, an extension of Article 50.

“Admittedly, the chances of a ‘no-deal Brexit’ may mathematically have also risen, but the market remains ever-hopeful that the Government will not commit an error of such epic proportions.

“Mrs May is set to make a few tweaks to her deal and return to the Commons on Monday. Realistically it will take a few attempts, but the most likely scenario in these impossibly uncertain times would be that her deal eventually gets through.”

She added that there was “still danger ahead”.

If a no confidence motion brought by leader of the Opposition Jeremy Corbyn succeeds then “sterling’s path could be a direct south as the risks of a general election would increase”, she said.

Craig Erlam, senior market analyst at Oanda, said: “We’ve seen plenty of volatility in the pound today, both ahead of the vote and in the immediate aftermath of it.

“The end result has been that it is pretty much back where it started the day against the dollar.

“This highlights just how uncertain the process remains and how little has been achieved with the vote today.”