Sterling reverses to a fall, investors doubt approval of Brexit deal

Investors get over relief on Brexit deal as doubts that it will get approved in parliament emerged one day after the agreement. In effect, the pound reverses to a fall on Friday morning.

The pound fell to $1.2874 from Thursday’s peak of $1.2988.

The announcement of the Brexit deal between Britain and EU caused the sterling to rise on Thursday. Not soon after, news of Boris Johnson’s unsure votes of approval from parliament left investors uncertain.

Johnson is to meet with parliament on Saturday to get the approval for the last-minute Brexit deal, where he has no majority. The Democratic Unionist Party (DUP), the Northern Irish party, said they will not support the deal.

“(The pound is) reflecting pessimism over the likelihood of whether the deal will be able to pass through parliament tomorrow,” Lee Hardman, currency analyst at MUFG said. “We think it’s a close call. We’re a little more optimistic.”

“If it’s rejected you might get a knee-jerk pound selloff, but we don’t think the downside risks are that great. We think there’d be an extension and an election. We don’t see no-deal risks coming back to the market.”

Members of parliament will vote on the deal on a special parliament session on Saturday. Officials anticipated possible change in DUP’s decision, but MUFG’s Hardman said it was “unlikely.”

Opposition Labour Party leader Jeremy Corbyn also expressed that he will not support the deal.

The market is now on alert for possible fluctuations in the sterling, with some options doubling in price with volatility lasting only within the week.

Sterling rose over 18% volatility overnight, a new seven-month high.

The deadline for Brexit is on Oct. 31.

 

 

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