Sterling falls as May admits she is still short of support for Brexit vote
* Sterling volatile as British politics reach fever pitch
* May still lacks support to win third vote this week
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
(Adds details, updates prices)
By Tommy Wilkes and Tom Finn
LONDON, March 25 (Reuters) - Sterling weakened on Monday
after British Prime Minister Theresa May admitted there was not
yet enough support to put her Brexit deal to a third vote, while
parliament plotted to pull the process away from her government.
The pound had jumped higher earlier in the day on media
reports that lawmakers would vote on Tuesday on May's
twice-defeated Brexit withdrawal agreement - that had raised
traders' hopes that May's deal would pass and prevent Britain
from crashing out of the European Union.
But May said on Monday that she did not have the support to
bring the deal to another vote.
"I'm more worried about no-deal Brexit than the market. I'm
not clear what Theresa May wants and what (opposition Labour
Party leader) Jeremy Corbyn wants -- these are the two main
characters in this play and I can’t read them at all," said
Thomas Costerg, senior economist at Pictet Wealth Management.
"The view that no-deal Brexit won't happen because there is
a majority in parliament against that is a bit of simplistic
view ... Accidents can happen.
"Options are narrowing and narrowing and narrowing," he
said, predicting sterling would drop to as low as $1.20 with a
no-deal Brexit and rise to at least $1.35-$1.40 if May's deal
With British politics at fever pitch and little clarity on
how, when or even if Brexit will take place, sterling traders
are struggling to navigate the blizzard of headlines. A range of
outcomes remain possible including a long postponement, a
no-deal exit or no Brexit at all.
Lawmakers in a series of vote on Monday - beginning at 2200
GMT - are likely to wrest control of the process from May after
twice rejecting the deal she agreed with Brussels.
With the prime minister short of support - the Northern
Irish party propping up her government still opposes her deal -
it is not clear when she will bring her divorce agreement back
May's ministers denied knowledge of a weekend plot to force
her to give a date for leaving office.
After trading as low as $1.3162, sterling was back
at $1.32 by 2050 GMT. It was 0.2 percent lower against the euro
at 85.74 pence.
The EU has said Britain can have a short delay to Brexit but
May must first win parliamentary approval for her withdrawal
deal from the bloc.
"The extension of the Brexit deadline was shorter than many
had hoped and we still have the problem of what type of
consensus deal lawmakers can rally around," said Michael Hewson,
chief market analyst at CMC Markets in London.
Currency derivative markets signalled growing caution about
the pound, with one-month risk reversals on sterling versus the
euro and the dollar at multi-month highs.
An indicator of how bearish or bullish investors are on the
outlook of the currency, risk reversals signal that short-term
negative bets on the pound are piling up rapidly despite the
broader calm in the spot markets.
Yields on British government bonds have tumbled in recent
days as investors sought safety, with the yield on the 10-year
Gilt falling below 1 percent for the first time
(Additional reporting by Josephine Mason and Sujata Rao;
Editing by Janet Lawrence and Ed Osmond)
First Published: 2019-03-25 11:36:55
Updated 2019-03-25 23:02:54
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