Fundamental Comment

Sterling rebounds as no-deal Brexit fears recede

Sterling rebounds as no deal Brexit fears recede

The pound sterling rose in early trading on Wednesday, as investors cautiously welcomed the success of British legislators in controlling parliament by trying to hold the process of no-deal Brexit. 

As of 08:10 GMT, the British pound rose by 0.64 percent against the U.S dollar at $1.2162, where the highest level recorded during the session was at $1.2163. In the previous session, the pound stumbled below $1.20, marking its weakest level in three years.

Not only against the U.S dollar, but also against the euro, as the pound rose 0.28 percent at 1.1033 euros.  

The pound recorded gains after legislators voted by 328 to 301 to approve the emergency Brexit debate proposal, which would theoretically allow Parliament to introduce legislation that could hinder the government's Brexit efforts on 31 October. 

If that attempt succeeds, it will force British Prime Minister Boris Johnson to demand an extension of the deadline for exiting the European Union, thereby preventing no-deal Brexit. 

Johnson lost his majority in the British House of Commons after a Conservative MP defeated and joined the Liberal Democrats. 

He said he would call for early elections, adding further political uncertainty but several MPs who opposed Brexit without a deal rejected it and called for a vote today. 

"I don't want an election, the country doesn't want an election," Johnson said, but he warned that Parliament would not leave him with any choice if he voted to block Brexit without a deal. 

The pound remained firm, holding earlier gains, as the Labour Party confirm they will not give their approval for an early general election today.

Data released today showed that the services sector eased growth to 50.6 from 51.4 in July, coming below estimates of 51.0.

Markit currently predicts the British economy to shrank by 0.1 percent in the third quarter, following  a 0.2 percent fall in the second quarter, which would be a technical recession.

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