Sterling fell after Prime Minister Theresa May’s plan to present her EU withdrawal deal for a third time to the Commons hit a major speed bump after a ruling by the House of Commons speaker raised further uncertainty about the course that Brexit will take.
Sterling had already been falling before the ruling by John Bercow which insists she must present a significantly different bill. Sterling dropped below $1.32 against the dollar and fell to 85.65 pence against the euro.
“Now the government will have to come back with substantial changes — which is literally impossible — in relation to the deal, otherwise it means a prolonged Brexit delay,” said Naeem Aslam, chief market analyst at retail broker Think Forex.
Other analysts, however, said the pound could enjoy gains this week.
“This move by parliament could simply increase the chances of a substantial delay to Brexit and if that happens, the risks of a second referendum or general election go up substantially,” said Ulrich Leuchtmann at Commerzbank.
Chris Beauchamp, chief market analyst at online broker IG, said: “The government now faces the total ruin of its strategy, as a third meaningful vote — a term that becomes less meaningful with each vote — is ruled out, unless changes are made. But the EU is adamant — it is this deal or nothing, and, as a result, the PM must now, it seems, ask for long extension.”
He added: “The Brexiteers believed that they had won last week, but now they may have lost Brexit entirely, since the longer an extension goes on, the more the chance of Remain increases.”
Writing before Mr Bercow’s ruling, Capital Economics in London said it believed that Ms May would fail to get her deal through the UK parliament before March 29.
“So in our view, while the next big rally in sterling could conceivably occur in the coming fortnight, it is more likely to take place later in 2019 or even 2020,” it said.
Additional reporting by Reuters and Bloomberg