Sterling hits 3-week low on reports UK PM May likely to change Brexit vote

LONDON: Sterling fell on Monday after a report said Prime Minister Theresa May is likely to change Tuesday's key vote in parliament on her Brexit deal to a less decisive provisional vote, raising the prospect of more uncertainty for the struggling pound.

The Sun newspaper's political editor cited unnamed sources as saying that May would likely change the vote "from a meaningful vote to a provisional one".

Lawmakers are expected to hold a "meaningful" vote on Tuesday on the withdrawal agreement May negotiated with Brussels last year and which they overwhelmingly rejected in January.

There was no immediate comment from the British government.

Reflecting the growing uncertainty, sterling fell for a ninth consecutive day as talks between Britain and the European Union hit an impasse.

Analysts said the pound would drop further if three Brexit votes scheduled for this week, including one allowing lawmakers to prevent a no-deal Brexit, were delayed.

"It would definitely be negative for the pound as markets would conclude that we are moving closer to the Brexit date without a resolution and that raises the risk of a chaotic no-deal Brexit," said Kallum Pickering, an economist at Berenberg.

No breakthrough emerged from weekend talks between the UK government and the EU over changing parts of the Brexit agreement related to the Irish border.

With Britain due to leave the EU in 18 days, the pound has weakened as doubts swirl over how, or possibly even if, Britain's exit will take place.

Most economists expect Brexit to be delayed by a few months and the two sides to eventually agree a free-trade deal, according to a Reuters poll.

At 1000 GMT sterling was down 0.3 percent at $1.2982 , a three-week low. It was also struggling against the euro at 86.52 pence, down half a percent on the day.

If May loses Tuesday's vote she will face another vote on Wednesday on whether parliament wants to leave the EU without a deal, with a majority expected to refuse the no-deal scenario.

A third vote would then be tabled for Thursday on whether the UK should request from the EU a limited extension of the March 29 Brexit date.

Traders are expecting big swings in the currency around this week's votes, according to a sharp rise in one-week implied volatility.

One-week implied volatility measures demand for options to hedge against big currency swings. A higher percentage reflects greater expectations of currency movements over the next seven days.

The Financial Times reported late on Sunday that the Bank of England had asked UK banks to triple their liquid assets in the three months around Brexit as a precaution for any hiatus in interbank lending.