Sterling Gains On Soft Brexit Speculation

GBP held near the day’s highs on Wednesday due to expectations that Prime Minister Theresa May’s announcement of cross-party talks with the opposition Labour party as a sign Britain could end up with close ties to the European Union after Brexit.

While May’s announcement by no means lifts the fog of uncertainty over the pound, it offers a glimmer of hope to investors who are worried Britain might crash out of the EU without a withdrawal deal on April. 12.

GBP gained 0.3 percent against USD in early London trading to 1.3187, its highest since March 28. The currency had slipped below $1.30 on Friday on fears of a no-deal Brexit.

It is up more than 1.3 percent from Tuesday’s low of $1.3015, struck after lawmakers’ failure on Monday to agree an alternative plan to May’s withdrawal agreement pushed Britain closer to a no-deal Brexit, the worst scenario for sterling.

Against the euro, GBPEUR held near its strongest level since March. 27 at 1.1760.

May will not set preconditions when she begins talks aimed at breaking the Brexit deadlock with opposition Labour leader Jeremy Corbyn on Wednesday, her Brexit minister Stephen Barclay said.

“This (reaching out to Labour) is right and proper and I think a soft Brexit is the right outcome even it will infuriate both wings of the debate,” said Chris Bailey, a European strategist at Raymond James in London.