British pound rebounds after PM loses majority in parliament

0 Comment(s)Print E-mail Xinhua, September 4, 2019
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The British pound rebounded Tuesday afternoon after British Prime Minister Boris Johnson lost a working majority in the parliament in the run-up to a crucial Brexit vote in the night.

Johnson will face a showdown in parliament in this pivotal week as Tory rebels and opposition Labour work to bring forward a bill to stop a no-deal Brexit. At Tuesday's vote, rebel MPs will try to take control of the parliamentary agenda, block a no-deal Brexit and extend the Brexit deadline to at least the end of January 2020.

British Tory MP Philip Lee defected to the Liberal Democrats hours ahead of the crucial vote in parliament, meaning Johnson no longer has a working majority in the House of Commons.

The pound has recovered its loss and made gains by late Tuesday afternoon, trading at 1.2095 against the U.S. dollar and at 1.1026 against the euro, up by 0.22 and 0.25 percent respectively. It was trading as low as 1.1965 against the U.S. dollar in early morning, marking its lowest level since a flash crash in October 2016 when the currency briefly fell sharply to 1.15 against the U.S. dollar before rapidly rebounding.

Market sentiments were marred by growing uncertainties related to Brexit. The UK prime minister has planned to take the UK out of the EU with or without a deal on Oct. 31 and the Downing Street has warned a snap general election should the MPs succeed in blocking a no-deal Brexit.

Bank of England data show the pound has not traded regularly below 1.20 against the U.S. dollar since 1985. The British currency has been sensitive to developments of the Brexit process since the Brexit referendum in 2016. It was trading at almost 1.50 against the U.S. dollar before the Brexit referendum in 2016 but has lost about 20 percent against the U.S. dollar since then.

Analysts expect the outlook for the pound will be volatile in the coming days as this week will be crucial for the Brexit process.

The Queen gave consent to Johnson's request late August to suspend the British Parliament for five weeks, which means the House of Commons will sit only for a few days after it returns on Tuesday from its summer recess. Parliament will then resume with a State Opening by the British monarch on Oct. 14, just over two weeks before Britain's planned departure from the EU.

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