Sterling struggles as threat of a no-deal Brexit grows

LONDON - 29 August 2019: The pound fell again on Thursday, a day after British Prime Minister Boris Johnson suspended parliament for more than a month to dodge a possible no-confidence vote and take Britain out of the European Union on the Oct. 31 deadline.

The move limits the time Johnson’s opponents have to prevent a disorderly Brexit. But it also increases the chances he will face a vote of no confidence and possibly an election.

The queen must approve the suspension. House of Commons Leader Jacob Rees-Mogg said on Thursday she did not question the government’s request to suspend parliament.

Johnson says he wants to renegotiate the terms of Britain’s exit from the EU, but he also says he’s willing to take the country out of the bloc in October without a deal. He rejected accusations he was trying to prevent lawmakers from delaying Britain’s EU departure.

Most members of parliament oppose a no-deal Brexit and they still have some time to call a vote of no confidence, but Johnson is not bound by law to resign, which complicates things further, analysts say.

Parliament re-opens for business on Sept. 3, but will be prorogued — suspended — the following week until Oct. 14.

Sterling was down 0.1% at $1.2196 and down 0.2% against the euro at 90.835 pence.

“This price action reflects concerns that the little time that remains for parliament to attempt to block a no-deal Brexit, will now be even shorter,” said Lee Hardman, currency analyst at MUFG.

The pound fell on Wednesday to a six-day low against the dollar and the euro. But the decline was moderate because most investors already thought a no-deal Brexit was the most likely outcome, judging by positioning data and derivatives pricing, analysts said.

However, the pound could come under further pressure, analysts said.

“The only certainties are that a no-deal Brexit is even more likely, and that uncertainty has risen. Both are negative for the pound,” said Marshall Glitter, senior strategist at ACLS Global.