Oct 21, 2019

British pound remains strong despite Brexit drama

Dion Rabouin, author of Markets

Photo: Jim Dyson/Getty Images

The British pound slipped but was much less volatile than expected after Prime Minister Boris Johnson's Brexit deal was rejected by Parliament on Saturday.

What's happening: The pound fell about 0.7%, but remained above $1.29, near a 5-month high. Big banks in London called in extra staff in anticipation of major market moves that didn't materialize after the first Saturday sitting in the House of Commons in 37 years.

What they're saying: “There is some uncertainty about Brexit, but it may not rattle investors too much because this is not an outright rejection of the deal,” Michael McCarthy, chief market strategist at CMC Markets, told Reuters.

  • "Trading volumes are around 40% of what they would normally be, which shows there’s not a lot of conviction in the market."

State of play: Parliament rejected Johnson's initial deal, but he may have the votes for a new agreement as members of the opposition Labour party as well as 20 former Conservatives are expected to support it.

  • Overall, the market remains on edge, but there appears to be little fear of Britain crashing out of the EU without a deal, as Johnson has threatened to do on Oct. 31.
  • "There was an initial sell-off, but it was much shallower than markets had anticipated," Russell Lascala, global head of FX at Deutsche Bank, told the BBC.

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