The pound tumbled yesterday after the United Kingdom government’s top legal adviser cast doubt on Prime Minister Theresa May’s last-gasp changes to her Brexit deal hours before a vital vote later in the evening.
Sterling, which had been rising after Ms May secured revisions to the Brexit withdrawal agreement, hit reverse after legal advice from Attorney General Geoffrey Cox.
“It looks like any hopes of an unlikely victory for the PM’s deal later have just been extinguished,” said XTB analyst David Cheetham.
Dr Cox said last-minute new agreements “reduce the risk” of Britain being “indefinitely and involuntarily” held in the so-called Irish border backstop.
However, he also warned that “the legal risk remains un-changed” that Britain would have no legal means of ending the controversial backstop without the EU’s agreement.
In reaction, the pound slid to as low as $1.3005 from $1.3143 just before Dr Cox published his advice. The euro jumped to 86.55 pence from 85.75 pence.
Overnight, following news of May’s hard-won EU concessions, sterling had struck a three-week peak at $1.3289 and to 84.76 pence per euro − a level last seen in May 2017.
“Sterling took a nose dive on the back of the Geoffrey Cox statement,” said ThinkMarkets analyst Naeem Aslam.
“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 sterling to move lower.”
Rabobank analyst Jane Foley said the despite the volatility, the pound remains the best performing G10 currency so far this year.
“Even if May’s deal is not passed today (yesterday), the market consensus remains of the view that a hard Brexit will be avoided and this view continues to provide underlying support for the pound.”
If the deal was to be voted down, MPs will today vote on whether Britain should simply leave on March 29 without any deal at all.
London’s stock market, meanwhile, did well yesterday, as is often the case when sterling is weak.
Frankfurt closed lower and Paris slightly up.
On Wall Street the DJIA index was lower in the early New York afternoon, but the S&P 500 and Nasdaq both rose.
Boeing shares lost more than six per cent on the second day of a rout for the airline’s stock as several governments closed their countries’ airspace to 737 MAX planes and airlines grounded the aircraft following a crash in Ethiopia.