Third time unlucky? Pound falls as parliament bans another vote on same Brexit deal
* Pound drops as chances of third Brexit vote diminish
* But some see upside potential on lengthy Brexit delay
* BOE meeting eyed though unlikely to change outlook
(Adds parliament speaker, updates prices)
By Tom Finn
LONDON, March 18 (Reuters) - Sterling dropped below $1.32 on
Monday after the speaker of Britain's parliament said Prime
Minister Theresa May's Brexit deal could not be voted on again
unless a different proposal was submitted.
The move by parliamentary speaker, John Bercow, saw the
pound shed half a percent with investors saying it had hurt
May's chances of getting her EU withdrawal agreement approved
before Britain's departure on March 29.
"Now the government will have to come back with substantial
changes (which is literally impossible) in relation to the deal
otherwise it means a prolonged Brexit delay," said Naeem Aslam,
chief market analyst at retail broker Think Forex.
"The chances of the UK crashing out of the EU have increased
once again because the EU needs a clear plan and a strategy
before they grant an extension," he added.
Other analysts, however, said the pound could enjoy gains
"This move by parliament could simply increase the chances
of a substantial delay to Brexit and if that happens the risks
of a second referendum or general election go up substantially,"
said Ulrich Leuchtmann, a currency strategist at Commerzbank.
May is still trying to salvage her Brexit deal by winning
over doubtful lawmakers including the Northern Ireland's
Democratic Unionist party.
Her spokesman said on Monday that Bercow did not forewarn
the government about his statement.
May's Brexit deal was defeated last week for a second time
in a rebellion helped by Eurosceptic lawmakers in her own
After Bercow spoke, the pound hit the day's low of $1.3183,
and was down nearly one percent. It also weakened
against the euro to a three-day low of 85.93 pence.
Prospects are worsening for May and she suffered a further
setback on Monday when Boris Johnson, the pro-Brexit former
foreign secretary, refused to back her agreement unless she
secured changes to the Irish backstop — designed to prevent a
hard border on the island of Ireland.
"It should no doubt have a moderately positive effect on
the British currency," he added.
Sterling traders are bracing for further volatility as May
tries to convince lawmakers to back her deal so that she can
attend a European Summit on Thursday and offer leaders something
in return for more time.
The Bank of England is expected to leave its interest rate
outlook unchanged at a policy meeting on Thursday due to the
deep uncertainty over Brexit.
Money markets currently price in around a 40 percent chance
of a rate rise in December.
Last week the currency swung wildly, trading between $1.2945
This week it has struggled to hold onto gains as traders
contemplate the array of Brexit possibilities that have opened
up including a second referendum or general election.
Options markets show implied sterling volatility -- a gauge
of expected swings in a currency -- still elevated, with
one-week vols near multi-month highs. Sterling vol is higher
than G10 as well as many emerging currency peers.
(Reporting by Tom FinnEditing by Peter Graff and Kirsten
Donovan, William Maclean)
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