Thursday 5 September 2019 12:59 pm

Sterling rallies against dollar to pass $1.23 as Boris grapples with Brexit

Sterling has broken through the $1.23 barrier today as traders’ shorts are being squeezed amid a GBP rally.

Read more: Prime Minister’s election plan scuppered as Labour holds out until Halloween

Confidence in the currency has reversed over the last two days as it recovers from hitting a 34-year low earlier this week.

The pound rose 0.73 per cent against the USD dollar to hit 1.2339 in early afternoon trading.

Against the euro, sterling climbed 0.4 per cent to 1.1149.

“Sentiment has turned a bit more positive on the pound because of perceived reduction in no-deal risk following Boris Johnson’s defeats in parliament,” chief analyst Neil Wilson said.

“Certainly the passing of the bill and the disarray in government provides some decent support – but largely this seems to be because shorts have decided to exit profitable positions.”

David Cheetham, chief market analyst at trader XTB pointed to Johnson’s parliament defeat last night as a catalyst for the pound’s gains today.

MPs voted against the government to support Hilary Benn’s bill, which could force Johnson to seek a Brexit extension until 31 January.

“Boris Johnson is now on the back foot once more after MPs have voted to pass a bill that essentially significantly reduces the threat of a no-deal Brexit and thus renders his negotiating position with the EU as far weaker – at least in his own eyes,” he said.

Meanwhile Labour thwarted Johnson’s attempts to call a general election to restore his majority in the Commons.

Leader Jeremy Corbyn said he would only back a snap election if the aforementioned Benn bill receives royal assent, something that is expected to happen on Monday.

That would likely mean a snap election would not happen on Johnson’s favoured 15 October date.

Read more: Jo Johnson quits Boris’ Tory party to spend less time with his family

“The key thing as far as the markets are concerned is that the prospect of no deal is receding once more and this has caused the bounce we’ve seen in sterling,” Cheetham added.

Johnson’s troubles were compounded today when his brother Jo Johnson quit, saying he could reconcile split loyalties between family and what he saw as being in the national interest.