Pound fragile after May's Brexit defeat, more gyrations expected

The pound stood flat at US$1.3064 and stuck to a narrow range.
The pound stood flat at US$1.3064 and stuck to a narrow range.PHOTO: REUTERS

TOKYO (REUTERS) - The pound stabilised in early Asian trade on Wednesday (March 13) after turbulence following the defeat of British Prime Minister Theresa May's European Union exit deal, but investors braced for more volatility ahead of additional Brexit proceedings.

The British Parliament on Tuesday rejected May's deal to quit the European Union for a second time, deepening the country's political crisis days before the planned departure date on March 29.

Lawmakers will now vote later on Wednesday on whether Britain should quit the world's biggest trading bloc without a deal. If such a "no-deal" exit plan is rejected, another vote will be held on Thursday on whether to extend the March 29 departure date.

"The parliament is likely to reject a 'no-deal Brexit' plan, and the March 29 exit date subsequently being extended now looks to be a distinct possibility. The pound is thus stabilising on such expectations for now," said Takuya Kanda, general manager at Gaitame.Com Research Institute.

"Considering how sensitive the pound is to headlines, we could see the currency gyrate again if the door is opened for an extension of the March 29 exit deadline."

Sterling stood flat at US$1.3064 and stuck to a narrow range. The currency had lost 0.65 per cent the previous day, when it fluctuated widely between US$1.3290 and US$1.3005.

The US dollar was on the back foot after data on Tuesday showed US consumer prices rose at a slower than expected pace.

The dollar index against a basket of six major currencies was little changed at 97.004 after losing 0.3 per cent overnight.

 

The euro was steady at US$1.1288 after rising 0.4 per cent the previous day as the greenback sagged on the lacklustre US inflation data.

The dollar was unchanged at 111.35 yen after ending Tuesday a shade higher.

The Australian dollar slipped 0.2 percent to US$0.7067 after a gauge of local consumer confidence slumped to its lowest in over a year in March.