LONDON: Sterling skidded to its weakest since June 2017 on Monday after Prime Minister Theresa May pulled a parliamentary vote on Britain's Brexit deal with the European Union.
Though there was no immediate official announcement, a source in Whitehall, the centre of British power, said Tuesday's vote would be delayed after colleagues told May she faced a rout.
The move thrusts Britain's exit from the European Union into confusion, with possible options including a disorderly no-deal Brexit, another referendum on EU membership, or a last minute renegotiation of May's deal.
The pound dropped sharply across the board, hitting a three-month low versus the euro and nearing $1.26 against the dollar, its weakest since mid-2017.
"GBP has come off initially on the news that the vote has been pulled," said John Marley, at FX risk management specialist Smart Currency Business. The pound's direction would now depend on the reason behind the vote delay, he added.
"One scenario is that May wants to avoid an embarrassing defeat... another is that she may be very close to securing agreement from the EU (with further negotiation) so sterling could still move either way from here," he said.
The pound fell 0.8 percent against the dollar to as low as $1.2606. It also slipped nearly 1 percent against the euro to 90.47 pence, its lowest since Sept. 5.
Britain's exporter-heavy FTSE 100 index initially climbed as sterling fell but later succumbed to broader selling across stock markets. The more domestic FTSE 250 index tumbled 1.2 percent.
Perceived safe-haven British government bonds rallied, with 30-year yields dropping around 7 basis points on the day to a 3-month low of 1.757 percent.
The pound has fallen for four consecutive weeks with traders struggling to comprehend the vote options and consequences.
Scenarios include a no-deal Brexit, a renegotiated deal and a second referendum.
Easing concern about Britain crashing out of the bloc in March without a deal, the EU's top court ruled on Monday that Britain may unilaterally reverse its decision to leave.
Some analysts said sterling's weakness on Monday reflected concerns May's position was increasingly at risk.
"May is now expected to make a late dash to Brussels in a frantic bid to renegotiate the deal but her position is no doubt becoming increasingly untenable," said David Cheetham, market analyst at online broker XTB.
Analysts had been focusing on the number of votes May could win or lose by - if the vote were to go ahead - and what that could mean for her chances of renegotiating a deal.
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