Sterling gains following May’s Brexit ‘Plan B’ statement

Sterling gained ground following British prime minister Theresa May’s comments that she would seek further concessions from the EU on the Brexit Withdrawal Agreement.

Britain’s pound had been volatile ahead of the statement, but later hit session highs against the US dollar after Mrs May promised to be more open with parliament in negotiating the country’s future relationship with the EU.

While the pound had steadied since last week as markets ratcheted up expectations that Britain would not leave the European Union without a deal, market watchers warned of more volatility ahead.

In an outlook note, UBS Wealth Management said Brexit risks make hedging pound exposure preferable over the next three months to avoid volatility and advised against buying sterling at current levels.

While the pound has recovered nearly 4% from early January lows to above $1.289 levels against the dollar, it still remained about 10% below from the 2018 highs of above $1.43.

With around two months to go until Britain is due to leave on March 29, investors advised caution around current levels as there was no sign on how it will leave the world’s biggest trading bloc, with the pound trading roughly midway of a two-year trading range.

Sterling rose about 0.4% from the session lows to trade virtually flat at $1.289. Against the euro, it was down fractionally to 88.2 pence.

Last week, Mrs May’s deal suffered a heavy defeat in parliament but she won a subsequent vote of confidence.

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