Sterling set for third weekly drop on Brexit concerns

Sterling steadied on Friday but was on track for a third consecutive week of losses as investors moved to the sidelines before the British parliament’s vote on Brexit next month.

Prime Minister Theresa May said on Thursday she was focused on persuading lawmakers to back her divorce deal with the European Union in a Dec. 11 vote, rather than preparing a plan B.

May secured an agreement with EU leaders on Sunday that will see Britain leave the bloc in March next year with continued close trade ties, but the odds look stacked against her getting it through a deeply divided British parliament.

We expect the deal to be rejected by parliament although we give the highest probability by far to the UK ending up with some form of the May deal and/or the Norway Plus option,” MUFG analysts wrote in a note.

Those concerns were reflected in the currency markets, with the British currency down nearly 3 percent in the last three weeks and derivative markets indicating more hedging activity before the vote.

The pound was changing hands at $1.28 against a broadly firm dollar. Against the euro, it was a shade stronger at 88.93 pence.

 

/reuters.com

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