Likely Brexit delay ushers more uncertainty for the pound
Sterling fell by a third of a percent on Wednesday as investors remained wary about the prospects of the British currency as Prime Minister Theresa May requests a short delay to Brexit after her failure to get a divorce deal ratified.
Though markets have raised expectations that a delay was inevitable, a likely extension leaves the Brexit divorce uncertain, with options including leaving with May’s deal, a longer delay, a disruptive exit or even another referendum.
The British currency fell a third of a percent to $1.3224 but remained well within trading ranges this week.
The British currency rallied to a 9-month high against the greenback of nearly $1.34 last week, as investors largely priced out a no-deal Brexit scenario.
Against the euro, the pound weakened by a third of a percent at 85.75 pence.
“Until some clarity emerges, we do not advocate taking directional views on sterling and advise hedging downside risks, but we note that sterling has tended to react positively to events that point to a substantial delay,” UBS strategists said in a note.
Just nine days before the March 29 exit date that May set two years ago by serving the formal Article 50 divorce papers, May is due to write to European Council President Donald Tusk to ask for a delay.
Various gauges of market volatility in the pound remained firm even as other gauges, such as one-month euro volatility indexes ticked lower.
Source: Reuters (Reporting by Saikat Chatterjee; Jon Boyle)