Sterling gains as MPs expected to vote against no-deal Brexit

LONDON - 13 March 2019: Sterling rallied more than half a percent on Wednesday on growing expectations that lawmakers would vote against leaving the European Union in 16 days time without an agreement.

The British currency has swung wildly between $1.30 and $1.33 in chaotic trading over the last 48 hours, but found some support in early London trading around $1.3150.

Prime Minister Theresa May badly lost a vote on her Brexit withdrawal agreement late on Tuesday and parliament will vote again on Wednesday on whether the United Kingdom should leave the European Union on March 29 without a deal.

May has given lawmakers in her party a free vote, and investors expect parliament will vote against a no-deal Brexit - which most economists say would cause significant harm to the economy.

“There should be an overwhelming Parliamentary majority to prevent a no-deal exit on March 29, which should lend some support to the pound,” Morgan Stanley strategists said.

The pound rose more than half a percent to the day’s high of $1.3155 at the London open, putting the currency about half way between this week’s lows of $1.2945 and its high of $1.3290.

Sterling was also stronger against the euro, hitting 86.020 pence, but was still weaker than the 22-month peak of 84.755 pence touched on Monday before hopes for May’s Brexit deal to pass were crushed.

Gauges of expected market volatility in the British currency showed some early signs of settling after briefly spiking to its highest levels this year on Tuesday.

One-month implied gauges of volatility held around 11 vol and below a high of 13 vol hit on Tuesday.