January 28, 2019 / 10:10 AM / 6 months ago

Sterling takes reality check ahead of parliamentary votes on Brexit

LONDON (Reuters) - The pound slipped on Monday after posting its biggest weekly rise in more than 15 months last week, as investors took profits before crucial votes in the British parliament that will aim to break the Brexit deadlock.

Wads of British Pound Sterling banknotes are stacked in piles at the GSA Austria (Money Service Austria) company's headquarters in Vienna July 22, 2013. REUTERS/Leonhard Foeger/File Photo

With less than two months to go before the United Kingdom leaves the European Union, lawmakers have set up a series of votes in parliament on Tuesday through which parliament and the government will try to find a way forward.

Hopes of an agreement receded further on Monday with EU deputy chief negotiator Sabine Weyand warning there was a risk of the UK crashing out of the EU by accident.

“There’s a touch of reality in the markets,” said Shaun Osborne, chief FX strategist at Scotiabank in Toronto. “...the risk running into tomorrow’s vote is that we may be in a situation where there may be no clear majority or any way forward.”

Tuesday is a chance for lawmakers to discover what sort of changes to May’s strategy would be required to win the support of parliament so that she can then try to renegotiate her withdrawal deal with the EU. Parliament resoundingly rejected that deal in a vote two weeks ago.

Osborne said it was likely the pound would fall further.

Some investors say that even if there is a broad agreement on extending the date of Britain’s exit from the EU beyond March 29, it would fail to fuel further gains in the currency.

“In the very short term, we would be cautious on the pound as none of the amendments tomorrow are legally binding unless the government prepares to shift its red lines, and we haven’t seen anything yet,” said Timothy Graf, head of macro strategy at SSGA in London.

On Monday, the currency edged 0.4 percent lower to $1.3149 in early trading, and moved towards $1.317 by GMT 1545. Against the euro, it weakened by a similar amount to 86.80 pence.

British Prime Minister Theresa May intends to give parliament a second chance to approve a Brexit deal as soon as possible, her spokesman said on Monday, adding that negotiations to change the deal so that it can win lawmakers’ support were continuing.

Reporting by Saikat Chatterjee and Virginia Furness; Editing by Toby Chopra and Gareth Jones

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