Pound holds gains as British PM May wins confidence vote
(Updates prices, adds quote, detail on vote)
By Saikat Chatterjee
LONDON, Jan 16 (Reuters) - The pound held on to the day's
gains on Wednesday, trading just off two-month highs against the
euro as British Prime Minister Theresa May saw off a
no-confidence vote, a day after lawmakers defeated her Brexit
May survived the motion after securing the backing of her
own party's rebels and Northern Irish allies, but must now try
to find a consensus with other lawmakers over how to proceed
with Brexit. She proposed immediate talks with other party
The scale of Tuesday's rout is seen opening the doors to a
variety of other Brexit options, including a delay to the March
29 deadline to leave the European Union or even a second
referendum, even though May has ruled those out in the past.
"Attention will now swiftly turn to Plan B. Our suspicion is
that when we hear the PM's next steps on Monday, it will look
remarkably like Plan A, which won’t offer markets much
guidance," said Dean Turner, UK Economist at UBS Global Wealth
He said that "unknowable political outcomes" made it unwise
to take outright bets on sterling at present.
By 1945, the pound was trading at 88.55 pence per euro
, inching up from 88.65 just before the vote and up
0.2 percent on the day. It held just off the two-month high of
Against the dollar, it was a shade firmer at
$1.2880, compared to around $1.2860 before the vote. It had hit
a two-month high on Monday at $1.2930.
Bank of England Governor Mark Carney said earlier in the day
that sterling's rise after May's plan was defeated suggested
investors felt the risk of a no-deal Brexit had diminished, or
that the process would be extended.
"The expectation that May is now set to seek cross-party
backing for a new deal is also reassuring for investors, since
this suggests an effort will be made to find a compromise with
broader appeal," Rabobank strategists said in a note.
Expectations that Britain may be inching towards a "softer"
Brexit is also playing in the currency derivative markets.
Implied volatility on the pound for three months
slipped back towards November lows, indicating markets are
slightly more optimistic about the pound in the short term.
"We still anticipate a decent-looking Brexit bill will be
passed and any concessions from the prime minister could result
in a 'softer' Brexit," said Hamish Muress, currency analyst at
(Reporting by Saikat Chatterjee, Dhara Ranasinghe, Maiya Keidan
and Sujata Rao; Editing by Kevin Liffey)
First Published: 2019-01-16 11:15:43
Updated 2019-01-16 22:03:59
© 2019 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.