Sterling rises as May faces pressure to go for soft Brexit

Britain's exit from the European Union was in disarray after the implosion of Prime Minister Theresa May's Brexit strategy left her under pressure from rival factions to leave without a deal, go for an election or forge a much softer divorce.

LONDON • The British pound rose yesterday as investors prepared for Parliament to vote on a series of Brexit options, with some hoping that the current uncertainty would end in a softer Brexit than Prime Minister Theresa May's defeated withdrawal agreement.

Mrs May's deal was voted down for a third time by lawmakers last Friday, sending sterling plunging to below US$1.30.

But the British currency has held at or above that level since, suggesting some investors have priced out the prospect of Britain crashing out of the European Union without a deal and instead expect a long delay to the exit or Brexit to emerge eventually where closer ties are maintained to the trading bloc.

MUFG analysts, referring to Mrs May, said: "There is a growing expectation that a (House of) Common's majority could coalesce around a softer Brexit that includes a Customs union, but she is facing more threats from Cabinet members to resign if she decides to pursue a softer Brexit."

Sterling rose 0.4 per cent to US$1.3083, also finding support from better-than-expected manufacturing survey data. The pound gained 0.1 per cent to 85.980 pence per euro.

The analysts said that while a no-deal Brexit on April 12 remained a risk for the pound, an emergency EU summit on April 10 could - if British lawmakers cannot agree anything this week - see a long delay to Brexit.

Parliament voted on different Brexit options yesterday and Mrs May could try to bring her deal back to a vote in Parliament as soon as today. But Mrs May's government and her party remain in open conflict.

Mr Marshall Gittler, a strategist at ACLS Global, said he considered a no-deal Brexit "as a higher possibility, even though it's officially been ruled out, simply because I don't see any of the other endings as particularly possible".

The IHS Markit/CIPS UK Manufacturing Purchasing Managers' Index was in at a reading of 55.1 last month, above the 51 level forecast by economists polled by Reuters.

The survey showed that factories in Britain stockpiled for Brexit at a frenzied rate last month, pushing manufacturing growth to a 13-month high.

REUTERS

A version of this article appeared in the print edition of The Straits Times on April 02, 2019, with the headline 'Sterling rises as May faces pressure to go for soft Brexit'. Print Edition | Subscribe