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Sterling falls to five-day low as Brexit debate gets under way

By Reuters - Jun 12,2018 - Last updated at Jun 12,2018

Anti-Brexit demonstrators protest opposite of the Houses of Parliament in London, Britain, on Tuesday (Reuters photo)

LONDON — The pound fell to a five-day low on Tuesday, reflecting wariness among investors about a parliamentary debate under way on amendments to Britain’s EU withdrawal bill.

Prime Minister Theresa May faces a showdown with lawmakers who want power to force her government to go back to the negotiating table if they reject a Brexit deal, testing her plans for leaving the European Union.

A minister long critical of the government’s handling of Brexit resigned earlier in protest at what he called its “wish to limit” the role of lawmakers in the process.

At 13:45 GMT, the pound was down 0.2 per cent against the dollar at $1.3359, close to a five-day low, and declined 0.3 per cent versus the euro to 88.29 pence. 

Two days of Brexit talks this week and a flurry of economic data may determine whether sterling’s two-month losing streak continues.

“The pound is likely to weaken if the government is defeated in key amendment votes at least initially as concerns over political stability will heighten,” MUFG analysts said.

“However, the amendments, if approved, could ultimately help to soften the final Brexit outcome which would be more favourable for the pound.”

Earlier on Tuesday markets shrugged off weaker-than-expected wage growth data, the latest sign of protracted weakness in the British economy.

Several companies have announced store closures and job cuts, while poor industrial production output numbers published on Monday hit sterling.

Those developments are likely to cut expectations of a Bank of England rate rise in August, given the central bank has said it wants to see more wage pressures before it hikes rates. 

Money markets currently price in a 44 per cent chance of a 25 basis point hike in August.

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