Pound edges lower as Brexit stalemate drags on

LONDON - 28 March 2019: Sterling edged lower on Thursday after British Prime Minister Theresa May’s offer to quit failed to convince hardline opponents to back her Brexit withdrawal agreement, fuelling more uncertainty for the pound in the short term.

The British parliament’s bid to agree an alternative plan fell short, leaving the Brexit process as deadlocked as ever.

“The upshot yesterday meant the stalemate over Brexit continues as parliament is indicating clearly what it doesn’t want but no clarity on what it wants,” said Lee Hardman, a currency strategist at MUFG in London.

The pound briefly fell to a day’s low of $1.3132, 0.4 percent lower on the session, before trimming some losses to stand 0.2 percent weaker at $1.3159.

Against the euro sterling dropped 0.7 percent to 85.555 pence.

In a sign of how nervous the currency markets have become, expectations of how much the currency would move in the coming weeks have climbed faster than bets on how volatile the pound will be over a year.

One-month implied volatility GBP1MO= in the pound has climbed by a quarter to nearly 13 vol and the spread between the one-month and one-year maturities has widened to its highest level since the British referendum vote in June 2016.