Sterling fell on Friday and was headed for a fourth consecutive week of losses as British Prime Minister Theresa May pressed ahead with plans for a parliamentary vote on her Brexit deal despite warnings it could topple her government.
Sterling's near-term fate hangs on whether May can win a majority for her Brexit deal in a vote on Dec. 11 that will define Britain's departure from the European Union scheduled for March. The odds look stacked against her getting the deal through a deeply divided parliament.
The pound was down 0.2 percent at $1.2754 at 1600 GMT, near an 18-month low of $1.2659 hit on Wednesday. It also weakened 0.3 percent against the euro to 89.27 pence. "Volatility is increasing," said Ulrich Leuchtmann, an FX strategist at Commerzbank in Frankfurt.
"It seems the proposed deal is going to be rejected so delaying the vote could be an option for May," he added. The Times newspaper reported on Thursday that senior ministers were urging May to delay the vote for fear of a rout but her spokesman has said it would go ahead as planned.
A defeat on Tuesday could open up a series of different outcomes to Britain's departure from the EU - each with its own impact on sterling - ranging from leaving without the deal to holding a second referendum on membership. Most observers still expect some kind of deal to be reached eventually with polls forecasting the pound will firm to $1.29 in a month and $1.34 in six months.
Still, fears of a no-deal Brexit skewering Britain's economy in less than four months' time are reflected in heightened volatility and outright short positions held by hedge funds. The growing chance of averting Brexit altogether - potentially via a second referendum - has led some investors to start pricing out the prospect of a damaging "no deal" departure from the EU, analysts say.
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