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Markets

Pound falls against dollar, euro after Brexit delay

The British pound fell on Tuesday against the euro and dollar after UK lawmakers rejected the government's proposed
22 Oct 2019
  • The British pound fell on Tuesday against the euro and dollar after UK lawmakers rejected the government's proposed Brexit timetable.
  • Although the vote on Tuesday left the pound down 0.56pc against the dollar at $1.289.
  • It was the first time parliament has signaled support for a deal on how Britain would leave the EU.

NEW YORK: The British pound fell on Tuesday against the euro and dollar after UK lawmakers rejected the government's proposed Brexit timetable, but its losses were limited as chances of a no-deal exit from the European Union were seen as miniscule.

Although the vote on Tuesday left the pound down 0.56pc against the dollar at $1.289, its bottom was only a two-day low. Against the euro it hit a session low and was last 0.38pc weaker.

"Obviously this has been pound negative," said John Doyle, vice president for dealing and trading at Tempus Inc, "but the pound is still very elevated considering where it has been over the last couple of weeks."

In a rare victory for Prime Minister Boris Johnson, lawmakers voted 329 to 299 in favor of his Brexit deal at an important second reading, which would open the agreement up to debate and possible amendment. It was the first time parliament has signaled support for a deal on how Britain would leave the EU, although still at an early stage in the legislative process.

But minutes later lawmakers voted 322 to 308 against a motion which set out a three-day schedule to rush the legislation through the House of Commons, which the government says is necessary to achieve Brexit on time.

Ahead of those votes, Johnson had warned parliament that if it defeated him on the timetable and forced a delay until January he would abandon his attempt to ratify the deal and push for an election instead under the slogan of "Get Brexit Done".

Johnson's remarks following the vote mentioned neither.

"There has been no mention of him pulling the deal, no mention of an election, so those seem to be empty threats at the moment," said Doyle, adding if the Prime Minister were to pursue an election it would likely be to advance the existing legislation.

"The extended timeline marginally increases uncertainty, meaning that aggressive GBP/USD up-moves are now unlikely in the short-term. Bottom line - GBP upside is still viable, but it will take longer to manifest," said said Peter Kinsella, head foreign exchange strategy at UBP.

Optimism that the UK will not leave the European Union without a deal boosted the pound about 6% since Oct. 10, and on Monday lifted it to a 5-1/2-month high of $1.3012.

Against a basket of six rivals, the dollar was 0.19% higher to 97.516.