The ongoing Brexit uncertainty, fuelling investor anxiety, led to major drop in the value of the pound in the beginning of the week. Sterling hit its lowest in last 34 years owing to the anticipation of Britain’s withdrawal from the Union without a deal. On Wednesday, things took a positive turn as pound revived in reaction to UK prime minister, Boris Johnson’s, loss of grip over the Brexit issue. Pound went up by 0.2% at $1.2090.
Investor confidence surged and the pound jumped its highest (1.4%) in last six months on Wednesday morning, when the UK MP’s succeeded in blocking Johnson’s move of taking Britain out of the EU without a deal.
City Index analyst Fiona Cincotta said, “It is all about politics in the markets at the moment. As the Boris Johnson government has progressively lost control of the situation, so sterling has rallied.”
“It now looks more likely that a coalition of rebel Conservative MPs and opposition parties will take a no-deal Brexit off the table with legislation, which was what the markets were hoping for.”
Labour Party members defeated Johnson in the House of Commons and won the bid against ‘no-deal’. On the contrary, the proponents of UK-EU withdrawal agreement have urged the British prime minister to request the EU to push back the UK’s exit deadline from 31 October to a three-month-later date. Despite Johnson’s loss, the economic experts have warned that the pound would remain volatile amid the political crisis. JP Morgan, warned investors against holding a large amount of sterling, while Royal London Asset Management predicted that pound would rise if Conservatives joined hands with Liberal Democrat forming a new coalition at the center.