Pound sinks as Brexit uncertainty drags after PM’s defeat

The Brexit-hit pound is enduring further volatility as the UK’s political crisis deepens following the heavy defeat for Theresa May’s Withdrawal Agreement with Brussels.

Sterling was trading more than 1% lower versus the dollar on the day, just below $1.27, as the clock ticked down to the so-called Meaningful Vote in the Commons.

It resulted in the PM’s Brexit deal being defeated by 230 votes.

The pound’s value swung wildly as the result was declared – sinking as low as $1.2668 – with traders initially citing the prospect of continued uncertainty over the country’s departure from the European Union.

It had started the trading day at $1.2863.

But it soon recovered some ground, heading back towards $1.28, when it became clear Mrs May would not resign and would continue to seek a way forward despite Labour tabling a vote of no confidence in the government, due to be debated on Wednesday.

One analyst told Sky News sterling’s recovery was down to a growing expectation that the Brexit process would now be delayed.

Naeem Aslam, chief market analyst at Think Markets, said: “Sterling has taken a U- turn on the back of the vote because investors know that now Brexit isn’t going to happen in March.”

The currency was not down heavily against the euro as the single European currency was under pressure itself after the president of the European Central Bank admitted heightened fears for the bloc’s slowing economy.

The pound has been a barometer of the Brexit process for financial markets – falling from levels just above $1.50 in June 2016 when the UK voted to leave the EU.

It has fallen as low as $1.15 since – though that was largely the result of a trading blip – with the prospect of a softer, or no Brexit, supporting the currency’s recovery in more recent times.

It hit a seven-week high against the greenback on Monday but later lost ground as the scale of the defeat for Mrs May emerged.

The PM’s Brexit deal had been given qualified support by major business groups, who argued firms needed clarity on the Brexit issue.

Miles Celic, the chief executive of TheCityUK, responded: “The outcome of today’s vote prolongs uncertainty and will continue to depress business confidence.

“The lack of clarity on the path to an orderly Brexit risks disruption and financial instability on both sides of the Channel.