LONDON (Reuters) – Sterling’s near-term fate hangs on whether British Prime Minister Theresa May manages to get her Brexit withdrawal deal through Parliament, according to Reuters polls that also found economic growth will be weak.
FILE PHOTO: Pound Sterling notes and change are seen inside a cash register in a coffee shop in Manchester, Britain, September 21, 2018. REUTERS/Phil Noble/File Photo
May faces deep opposition in parliament ahead of a Dec. 11 vote on her withdrawal agreement, raising the risk of a no-deal Brexit shock to the economy in less than four months’ time.
She suffered embarrassing defeats on Tuesday at the start of five days of debate over her deal to leave the European Union that could determine the future of Brexit and the fate of her government.
If the deal is agreed, sterling GBP= will gain 3.5 percent, according to the median in a poll of foreign exchange strategists taken mostly as Parliament debated the deal, but if it fails to pass the pound will fall by 2.75 percent.
“Our colleagues are right to flag the risks that Parliament could initially reject the deal. This inevitably leads to a knee-jerk sell-off in GBP,” noted BofAML analysts.
“We think there is likely to be a material repricing of the UK rates curve once a deal is announced and ratified, which in turn is likely to be bullish for GBP.”
Sterling has ricocheted on each piece of Brexit news, largely ignoring economic data. As predicted in Reuters polls ahead of the June 2016 referendum on EU membership, it has fallen versus the U.S. dollar, down well over 10 percent on Wednesday from pre-vote levels.
There is still only a median 25 percent probability no agreement is reached before Britain is due to leave the EU on March 29,