Sterling stuck on a low amid doubts over Brexit extension
The pound was stuck close to its lows against the euro yesterday after British Prime Minister Theresa May requested a second Brexit deal extension amid deadlock in the UK parliament.
Sterling was 0.04pc lower against the euro in trading yesterday at 86.203p after financial markets participants digested the latest news and concluded that the risks of a no-deal exit from the European Union were dimming but had not disappeared.
Sterling is a bellwether for sentiment on the Brexit process. The Central Bank here warned the pound could approach parity if the UK crashes out of the EU without a deal. Mrs May has requested the Article 50 exit process be extended until June 30 and the question is whether EU leaders agree at a meeting next Wednesday.
Given the inability of the UK prime minister to win support for any position at Westminster, there is some scepticism among EU leaders of further accommodation, although Brussels will not want to be blamed for forcing a crisis.
Mrs May's need to secure support from the opposition Labour Party to get a deal through parliament points towards a softer approach than the one she presented earlier.
"We wouldn't be surprised if the talks fail. If so, the government will provide a number of options for parliament to vote on, likely to include no deal, May's deal, a softer form of Brexit and a second referendum," said Andrew Wishart, UK economist at Capital Economics.
So far, none of these options has managed to secure enough support to pass and it is not clear what would get them over the threshold in any future vote.