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Brexit tension sends pound tumbling

The pound tumbled Tuesday after the UK government’s top legal advisor cast doubt on Prime Minister Theresa May’s last-gasp changes to her Brexit deal hours before a vital vote that few think May can win.

Sterling, which had been rising after 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.

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 unchanged” that Britain would have no legal means of ending the controversial backstop without the European Union’s agreement.

In reaction, the pound slid to as low as $1.3005 from $1.3143 just before 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.

– Nose dive –

“Sterling took a nose dive on the back of the 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, 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 is voted down, MPs will Wednesday vote on whether Britain should simply leave on March 29 without any deal at all.

London’s stock market, meanwhile, did well on Tuesday, 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 percent 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.

– Key figures at 1640 GMT –

Pound/dollar: DOWN at $1.3085 from $1.3150 at 2100 GMT on Monday

Euro/pound: UP at 86.19 pence from 85.50 pence

Euro/dollar: UP at $1.1279 from $1.1245

Dollar/yen: UP at 111.36 yen from 111.21 yen

London – FTSE 100: UP 0.3 percent at 7,151.15 points (close)

Frankfurt – DAX 30: DOWN 0.2 percent at 11,524.17 (close)

Paris – CAC 40: UP 0.1 percent at 5,270.25 (close)

EURO STOXX 50: FLAT at 3,303.95

New York – DOW: DOWN 0.3 percent at 25,575.00

Tokyo – Nikkei 225: UP 1.8 percent at 21,503.69 (close)

Hong Kong – Hang Seng: UP 1.5 percent at 28.920.87 (close)

Shanghai – Composite: UP 1.1 percent at 3,060.31 (close)

Oil – Brent Crude: UP 30 cents at $66.88 per barrel

Oil – West Texas Intermediate: UP 45 cents at $57.23

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