British Pound Firms Up After Lawmakers Vote to Block No-Deal Brexit


© Bloomberg. A collection of British five pound sterling banknotes sit in this arranged photograph in London, U.K., on Thursday, Oct. 13, 2016. The U.K. currency is getting harder to trade, and to predict, because the nation’s exit from the European Union has changed the rules of engagement.

(Bloomberg) — Sterling firmed after U.K. lawmakers voted to block a so-called no-deal Brexit, although the currency held well within its trading range from the prior day.

The pound climbed as much as 0.2 percent to $1.3181 in Asia trading Thursday. The move came after a bill to prevent Britain from tumbling out of the European Union without an agreement passed the House of Commons by a solitary vote. It will now go to the House of Lords, which is widely expected to approve it.

The U.K. currency “got a lift though I would have expected a bit more,” said Bipan Rai, North American head of foreign-exchange strategy at Canadian Imperial Bank of Commerce. “There are still some hurdles to clear.” He sees the pound reaching $1.34 by the end of this quarter, given the declining odds of a no-deal scenario.

The situation nonetheless remains exceptionally fluid. While the most recent vote is a step toward a so-called softer Brexit, there are many hard negotiations still to come, and the risk of an election also looms.

“Anything that helps avoid hard Brexit is positive,” said Westpac currency strategist Sean Callow. But he also noted ongoing speculation about an early election, divisions within the ruling Conservative Party and the prospect of a joint Labour-Scottish National Party government “which sterling has lots of reasons not to like.”

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