November 19, 2018 / 9:44 AM / a month ago

Sterling inches higher as May battles to save her Brexit deal

LONDON (Reuters) - Sterling rose on Monday as British Prime Minister Theresa May sought to win support for her draft European Union divorce deal which has come under attack from many in her ruling Conservative Party.

FILE PHOTO: A British Pound Sterling note is seen in this June 22, 2017 illustration photo. REUTERS/Thomas White/Illustration

After a week in which a slew of ministerial resignations rocked May’s government, a confidence vote in her leadership has yet to materialise and she is clinging to power.

“GBP looks bid... possibly due to short sellers last Friday disappointed by the lack of a leadership vote to be called yet,” said Jordan Rochester, an FX analyst at Nomura.

The pound rose 0.1 percent versus a weaker dollar to $1.2850. That takes sterling away from lows of $1.2725 hit last week, but the British currency was as high as $1.3176 earlier this month before the UK draft deal struck with the EU triggered a wave of resignations.

Against the euro, sterling fell 0.1 percent to 89.10 pence per euro.

The currency briefly dropped 0.3 percent after May said on Monday that an extension of the Brexit transition period was unlikely. Traders also cited a large euro purchase as a reason for the dip.

Rochester said sterling was likely to rise as May’s campaign to promote her deal continues. But any headline confirming a sufficient number of letters had been received to trigger a confidence vote, or another resignation, would send the pound lower.

May must convince enough colleagues to back her plan in order to get it through parliament, a formidable task given the broad criticism.

She defended her deal in a speech to the CBI business lobby group’s annual conference on Monday, saying Britain would embark on an intense week of negotiations to try to thrash out the details of its outline future relationship with the EU, its largest trading partner.

“The leadership challenge to PM May is still some way off securing the 48 names required, with most observers assuming there’s no way they’ll get the 150+ votes required to unseat her. Equally there seems little chance of PM May getting her Withdrawal Agreement through Parliament,” ING analysts said in a note to clients.

The EU is due to hold a summit to discuss the deal on Nov. 25.

Reporting by Tommy Wilkes and Tom Finn; Editing by Gareth Jones

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