Tuesday’s session was dominated by the British pound and Brexit’s pending vote on how the U.K. will leave the European Union on March 29.
The British pound GBPUSD, -0.7605% experienced a volatile morning, marked by a sharp 2% swing between its high and low-point, ahead of the key vote in Parliament on Prime Minister Theresa May’s revamped Brexit deal. The U.K. leader received last-minute assurances on the treatment of the Northern Irish border, which has been at the heart of the issues surrounding Brexit, from European Commission President Jean-Claude Juncker late Monday. This initially supported the pound in Tuesday’s session. Critics of May’s deal worry that the special treatment of the border between Northern Ireland and the Republic of Ireland will leave the U.K. de facto in the European Union.
Sterling turned negative after U.K. Attorney General Geoffrey Cox said that while the changes May secured to her deal reduced the risk of the U.K. indefinitely being trapped in the customs union of the EU, it didn’t get eliminate legal risk, according to reports.
“Sterling took a nose dive on the back of the Cox statement. It was his opinion which matters the most, now that he has made it clear that the recent deal has no weight, the door is wide open for the sterling to move lower against the dollar,” said Naeem Aslam, chief market analyst at TF Global Markets.
The pound last bought $1.3012, down from $1.3149. Against the euro EURGBP, +0.8538% sterling also dropped sharply, with the shared currency buying £0.8653, up 1.2%
“Another historic defeat is strongly on the cards for Mrs. May and all options are on the table with respect to another election or no Brexit at all. For us, we are looking at the support level of 1.2650 which the price can easily touch after the parliament’s vote.” Aslam added.
Read: Here’s what’s next for Brexit and the British pound
In earlier data, U.K. January gross domestic product came in stronger than expected at 0.5%. Industrial production and manufacturing production for the same month also beat forecasts.
In other currencies, the U.S. dollar DXY, +0.09% was little changed at 97.249, while the euro EURUSD, +0.0889% was slightly stronger, buying $1.1252, versus $1.1245 late Monday.
Consumer-price index figures for February are on the U.S. economic calendar for 8.30 a.m. Eastern.
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