Sterling failed to get a significant boost from the EU rubber-stamping the Prime Minister’s draft Brexit deal over the weekend, with markets awaiting the outcome of a crucial parliamentary vote next month.
While EU leaders voted in favour of Theresa May’s Brexit agreement despite the threat of a Spanish veto over the future of Gibraltar, the pound did not leap as it has done after previous Brexit breakthroughs.
While sterling rose to as high as 1.285 against the dollar, by the end of the day it had settled back to 1.282, roughly where it had started the day.
Against the euro, the pound fell to a low of 1.127 before climbing back to 1.13, slightly higher than its opening 1.297.
Connor Campbell, financial analyst Spreadex, blamed the uncertain passage that awaits May’s Brexit deal for the lack of a spike in value.
“That the currency’s growth wasn’t greater post-EU summit is due to the treacherous path Theresa May now must walk if she wants a successful parliamentary vote in December; it looks like getting the 27 individual members of the European Union to agree to a deal may end up having been easier than forcing the Tory party to do the same,” he said.
“it was really just a case of dotting the i’s and crossing the t’s on her deal,” added David Cheetham, chief market analyst at forex broker XTB.
“The real challenge remains getting it through parliament. With a Commons vote pencilled in for 12 December, the PM has a little over two weeks to sell the agreement to the public and MPs.”
May is now set to tour the UK to promote her Brexit deal to citizens after two radio phone-ins that saw her defend her deal to callers on LBC and the BBC.
The Prime Minister is also reportedly preparing for a televised showdown with Labour leader Jeremy Corbyn ahead of the parliamentary vote.
Until then, the pound may stay low – and volatility might continue in the market, warned Russ Mould, investment director at AJ Bell.
“The fact that EU leaders have agreed the UK’s exit deal ultimately isn’t enough to convince the market that Brexit will be conducted smoothly,” he said.
“Getting the deal approved by parliament is the real hard task, so UK equities are likely to remain volatile until the vote in mid-December.”