Pound stumbles after rallying on no-deal vote

13 March 2019, 18:10 | Updated: 14 March 2019, 18:58

The pound has faltered after hitting a nine-month high against the US dollar, as traders weighed the implications of a third Brexit vote this week.

Sterling had rallied sharply on Wednesday evening after MPs rejected a no-deal Brexit in any circumstance, lifting it by as much as three cents higher to nearly $1.34 versus the US currency on the day.

But it gave up some of those gains as markets reflected on continued uncertainty after the parliamentary vote, which was non-binding, sending it down to a little over $1.32.

The pound was also down against the euro on Thursday, trading at just over €1.17 having reached a fresh 22-month high of €1.18 the night before.

There was little change in the currency after MPs later voted to back a Brexit delay.

The currency has swung wildly amid the week's parliamentary drama - rising on Monday on hopes that Theresa May had secured a deal with the EU that would be accepted by the Commons before falling back again as she headed for another crushing defeat.

But the fading prospect of a damaging no-deal scenario has buoyed the currency up since then.

A new report from Goldman Sachs put the chances of a such a scenario at 5% - a shift from Wednesday's position of 10%.

Analysts at the US investment bank wrote: "We now see a 60% chance (up from 55%) that a close variant of the prime minister's current Brexit deal is eventually ratified."

There was a broad welcome for the MPs backing a Brexit delay from business groups but it was combined with continued frustration about the lack of a clear way forward.

A survey for the CBI suggested nearly nine in 10 firms would back a delay to the Brexit process but only if the alternative is to leave the EU with no deal.

Adam Marshall, director general of the British Chambers of Commerce, said: "While most businesses will support an extension to Article 50 to avert the prospect of a messy and disorderly exit on 29 March, with just two weeks to go this vote leaves firms with no real clarity on the future.

"Once again, businesses are left waiting for Parliament to reach a consensus on the way forward and are losing faith that they will achieve this.

"In the meantime, firms are continuing to enact their contingency plans, anxiety amongst many businesses is rising, and customers are being lost."