Pound edges off five-month lows as May dusts off battered Brexit deal

Tom Belger
Finance and policy reporter
UK prime minister Theresa May has dusted off a new form of her Brexit deal. Photo: Associated Press.

Sterling has edged higher from a five-month low against the dollar, as investors gave a lukewarm welcome to UK prime minister Theresa May’s latest bid to get MPs to back a Brexit deal.

The pound inched up 0.25% in early trading, after plunging to its worst week since October 2017 when cross-party talks on Brexit broke down last week.

The British currency was also up 0.29% against the euro shortly after 10.15am.

May used a Sunday Times column to promise a “new, bold offer” with an “improved package of measures” to gain enough MPs support to get a Brexit agreement through parliament.

But sterling’s gains remain limited as many believe her latest plans are broadly a dusting-off of the same agreement with Brussels that has been voted down by MPs three times before.

"News reports suggest it's a retread of old ideas and as long as that is the case, the market is going to be very sceptical," said Rabobank FX strategist Jane Foley.

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Labour leader Jeremy Corbyn’s stance has also curbed hopes of a breakthrough, with the opposition chief saying he would not back such a bill without fundamental changes.

There are reports the refashioned agreement will not only contain no proposals on customs arrangements that might win Labour support, but will also keep the same backstop plans for the Irish border.

Many backbench Conservative MPs have repeatedly said they cannot support the Irish backstop, fearing the plan to stop a hard border between Northern Ireland and the republic will keep the whole of the UK too closely aligned to EU rules.

The Democratic Unionist Party (DUP), which had agreed to back May’s government, has also repeatedly dismissed the backstop, with their own concerns it will see Northern Ireland governed by different rules to the rest of Britain.

There are fears on the markets that if the prime minister’s deal fails to convince MPs a fourth time, the chances of a no-deal Brexit will significantly increase.

Leaving the EU without a deal is seen as a worst-case scenario by most businesses, with the rules and processes that make British trade with the continent virtually seamless potentially abandoned overnight.

Britain would be left with no clear alternative way out of the political crisis, with the clock ticking down to the UK’s agreed departure date in October and a higher chance of Britain falling out without a deal ‘by accident’.

But a fourth defeat for May could also spell the end of her premiership. There would then be a leadership election, in which some analysts fear a hardline candidate prepared to leave the EU without a deal could win over Conservative MPs and members.

Foley said a victory for former London mayor Boris Johnson, who led in a recent poll of party members, would “potentially increase the chances of a hard Brexit.”

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