Sterling slips below $1.30 after MPs reject May Brexit plan

Britain’s currency slipped below $1.30 for the first time in two weeks after MPs defeated Theresa May’s Brexit plan for a third time.

Sterling was off 0.35 per cent to just a whisker under $1.30 after the House of Commons rejected the prime minister’s bid to push her plan through in a two-part vote. It was down 0.33 per cent against the euro at €1.1573.

Mrs May’s deal lost in the House of Commons by a margin of 286 to 344 against in the latest blow to her attempt to push through a pact she spent months negotiating with Brussels through parliament. The defeat thrusts the UK into a realm of even deeper uncertainty.

“The rejection of May’s Brexit deal by 58 votes means with two weeks and eight hours to go until the UK is due to leave the EU there is still no clear path for Brexit itself, the economy and the financial markets,” said Paul Dales, chief UK economist at Capital Economics.

The angst is apparent in the UK’s sovereign bond market, where medium-term gilts rose in price on Friday. The two-year gilt yield, which is seen as sensitive to monetary policy, slipped to 0.639 per cent, down about 1.9 basis points from Thursday’s close. In contrast, yield on US Treasuries of the same maturity rose 4.6 bps on the day.

Dean Turner, UK economist at UBS Wealth Management, added: “Sterling hasn’t responded favourably to today’s result, likely interpreting an increased risk of a no-deal scenario two weeks hence. That said, our view remains that MPs will ultimately avoid this outcome.”

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British stocks broadly shrugged off the vote. The large-cap FTSE 100 was up 0.6 per cent, while the mid-cap FTSE 250 gained 0.9 per cent.


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