Sterling lifted by report that Britain will delay Brexit date
* Sterling hits highest since late November vs dollar
* Analysts say growing likelihood Article 50 will be
* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
(Updates with latest prices, new quote)
By Tommy Wilkes and Sujata Rao
LONDON, Jan 11 (Reuters) - The pound jumped on Friday on
growing expectations that Britain will seek to delay its
scheduled departure date from the European Union.
A denial by Prime Minister Theresa May's spokeswoman of a
newspaper report knocked sterling off highs but it remained up
on the day, with analysts citing a growing sense among some
investors that Britain will not be leaving the EU on March 29.
Two of the biggest donors to the Brexit campaign told
Reuters they now believe the project they championed will
eventually be abandoned by the government, underlining the
uncertainty about what will happen after March 29, Britain's
scheduled departure date.
Data published on Friday showed Britain's economy cooled in
the three months to November, but the focus remained on May's
efforts to get her Brexit deal through parliament.
A series of setbacks suffered by May in parliament ahead of
the vote on her Brexit deal next week had pushed sterling to a
one-week low against the euro before London's Evening Standard,
quoting British cabinet ministers, reported that Britain could
extend Article 50, which determines the exit date.
On Friday sterling rose as much as 0.6 percent to $1.2851,
its highest since late November, before settling around
$1.28. The British currency is headed for its best week since
Against the euro the pound gained 0.7 percent to 89.615
Not all analysts are agreed that a delay to Britain's Brexit
date will benefit the UK.
"Politicians love to kick the can down the road but there is
a cost associated with that. Consumer confidence has weakened,
business confidence has weakened so that time comes with a
cost," said Mike Bell, global market strategist at JP Morgan
Parliament is due to vote on May's withdrawal deal, agreed
with Brussels, on Jan. 15, but the prime minister looks set to
lose the vote.
The run-up to the parliamentary vote is likely to dominate
trading of sterling but the consequences of its outcome for the
British currency are far from clear.
"I can see a scenario where we fall to $1.10 and I can
easily see a scenario when we move to $1.45," said Fahad Kamal,
chief market strategist at Kleinwort Hambros.
"The range is massive and the conviction is little. There's
nobody in the world who would surmise how this will turn out."
British lawmakers have demanded a quick plan B if May loses
the vote and that could reduce the chances Britain will leave
the EU without a divorce deal.
Despite the uncertainty, the risk that sterling will fall
against the dollar is its lowest in more than four months,
according to one-month risk reversals, a gauge of market
Expectations for sterling price swings have also diminished
in the last few sessions.
"A no-deal Brexit has become less likely. But anyone who
tries to make a prediction of what the Brexit outcome will be is
only deluding themselves," said Sarah Hewin, chief Europe
economist at Standard Chartered.
"Both extremes look live – the chance of a no-Brexit and the
chance of a no-deal Brexit."
(Additional reporting by Tom Finn and Josephine Mason
Editing by Gareth Jones)
First Published: 2019-01-11 14:30:46
Updated 2019-01-11 17:58:11
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