Markets

Pound climbs as Rees-Mogg indicates he may back May’s Brexit deal

New deadline for leaving EU looms as MPs remain deadlocked

Photograph: iStock

Tue Mar 26 2019 - 07:56

The pound climbed as Brexiteer Jacob Rees-Mogg signalled he could back the UK Prime Minister's deal to leave the European Union, keeping alive the possibility that her plan may eventually pass through Parliament.

Sterling reversed earlier declines to lead gains across the Group-of-10 currencies as Mr Rees-Mogg said Theresa May’s deal was “better than not leaving at all”. Mr Rees-Mogg leads an influential grouping of lawmakers, the European Research Group, who have opposed her Brexit strategy so far.

“The ERG may capitulate and that might see meaningful vote three back in play,” said Jeremy Stretch, head of Group-of-10 currency strategy at Canadian Imperial Bank of Commerce. “The risks of the ERG attempting to encourage the government over the cliff edge have diminished, alternatively the probability of a soft Brexit has increased.”

Sterling gained 0.4 per cent to $1.3244 by 11.11am in London, after earlier falling as much as 0.3 per cent. The currency strengthened 0.2 per cent to 85.58 pence per euro, while the yield on UK 10-year government bonds gained three basis points to 1.01 per cent.

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The move in the pound may have been exacerbated by thin trading, with options volumes at 75 per cent of recent averages, according to data from the Depository Trust and Clearing.

The drop to the day’s low led some long positions to be stopped out, triggering fresh buying on the Rees-Mogg headlines, said a trader in Europe who asked not to be identified because they are not authorised to speak publicly. Parliament remains deadlocked with just weeks remaining until a new deadline to leave the EU. MPs are set to vote on a series of different options Wednesday, including reversing Brexit and holding a second referendum.. – Reuters

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