Pound Sterling jumped 0.86 percent for the day against the US dollar to $1.3187 at 2:50pm, according to Bloomberg. The currency had surged to a 22-month high on Tuesday – hours after Theresa May secured a Brexit compromise on the controversial Irish backstop from European Commission President Jean-Claude Juncker. It had jumped as high as $1.3290 but then plummeted to $1.3020 after Attorney General Geoffrey Cox admitted the Prime Minister’s new Brexit deal failed to reduce the legal risk associated with the backstop.
The pound also surged 0.68 percent against the euro to €1.1662, according to Bloomberg.
Last night, Theresa May suffered a crushing defeat in the House of Commons when her Brexit deal was defeated by 149 votes.
Later today, MPs will vote on whether Britain should leave the European Union without a Brexit deal in place.
Pound Live: Sterling is surging against the US dollar and euro after a day of high Brexit drama
Without an acceptable plan, Britain might have a difficult time convincing European leaders at the EU summit next week, forcing market participants to reverse their positions on the pound and again exposing the currency to sudden downturns
If this exit plan is rejected by Parliament, another vote will be held on Thursday on whether to delay Brexit and extend Article 50.
Ayako Sera, senior market economist at Sumitomo Mitsui Trust, warned the pound could be exposed to more intense volatility if an acceptable Brexit plan is not in place before the next European Summit in Brussels on March 21.
She said: “Even if Britain decides to extend the Brexit deadline, the question will shift quickly to the length of the extension it desires and what it plans to accomplish within that period.
“Without an acceptable plan, Britain might have a difficult time convincing European leaders at the EU summit next week, forcing market participants to reverse their positions on the pound and again exposing the currency to sudden downturns.”
Pound Live: Sterling has staged a huge recovery against the US dollar
Takuya Kanda, general manager at Gaitame.com Research Institute, said: “The parliament is likely to reject a ‘no-deal Brexit’ plan, and the March 29 exit date subsequently being extended now looks to be a distinct possibility.
“The pound is thus stabilising on such expectations for now.
“Considering how sensitive the pound is to headlines, we could see the currency gyrate again if the door is opened for an extension of the March 29 exit deadline.”
Speaking after last night’s defeat in the Commons, the Mrs May warned voting against leaving without a Brexit deal and for an extension “does not solve the problems we face”.
Pound Live: The British currency could fluctuate wildly this week during key Brexit votes
She said: “The EU will want to know why we want that extension.
“The house will have to answer that question: does it want to suspend Article 50, does it want a second referendum, or does it want another deal, but not this deal.”
Samuel Tombs, UK economist with Pantheon Macroeconomics, told poundsterlinglive.com: “More important votes will be held on Thursday, when the government will lay down an amendable motion to seek an extension to Article 50.
“A cross-party amendment proposing free votes on a range of different Brexit options likely will be tabled; it stands a better chance of succeeding this time, now Mrs May’s deal is effectively dead.”
Pound Live: Theresa May has suffered two huge defeats on her Brexit deal so far this year
He added: “The Withdrawal Agreement would be unrevised, but the Political Declaration would be overhauled to bring Labour MPs on side.
“We still see around a 30 percent chance of a second referendum, either called by Mrs May or backed by a majority of MPs to break the deadlock, but believe the chances of another election remain slim.”
Delivering his Spring Statement in the House of Commons, Philip Hammond warned economic progress would be threatened unless MPs took the threat of an imminent no deal Brexit off the table in the vote later today.
The Chancellor said: “Our economy is fundamentally robust. But the uncertainty that I hoped we would lift last night, still hangs over us.
“We cannot allow that to continue. It is damaging our economy and it is damaging our standing and reputation in the world.
“Tonight, we have a choice. We can remove the threat of an imminent no-deal exit hanging over our economy.
“Tomorrow, we will have the opportunity to start to map out a way forward towards building a consensus across this House for a deal we can, collectively support, to exit the EU in an orderly way to a future relationship that will allow Britain to flourish, protecting jobs and businesses
“A brighter future is within our grasp. Tonight, let’s take a decisive step towards seizing it and building a Britain fit for the future; a Britain the next generation will be proud to call their home.”