Pound Weakens on Concern May Is Headed for Brexit Vote Drubbing

(Bloomberg) -- The pound slipped for the fifth time in six days against the dollar as concern grew that a crushing defeat for U.K. Prime Minister Theresa May in Parliament on her Brexit deal could even bring down the government.

Sterling was on course for a fourth straight weekly loss amid media reports that the premier was struggling to even get members of her own government to back the pact. A failure to get lawmakers’ approval for the agreement could open up risks including a no-deal Brexit or even another referendum. The Times reported that ministers are urging May to call off the vote.

“It has been a testing time for the pound, as the currency has been dragged around by to-and-fro Brexit developments,” said Irene Cheung, a senior strategist at Australia & New Zealand Banking Group, which sees the pound slipping to $1.20-$1.25 in 2019. “At this point, it seems extremely unlikely that the withdrawal agreement offered by the European Union will be passed by the U.K. parliament, which remains highly fragmented.”

While May is widely expected to lose the vote, a no-deal Brexit is now less likely after lawmakers voted to give themselves a say on what happens next if May’s plan is rejected. Still, sterling remains vulnerable to Brexit headlines, with just five days to go until the key vote.

The pound slipped 0.1 percent to $1.2720, and was little changed against the euro at 89.05 pence. Implied volatility on one-week pound-dollar options remained near the highest level since July 2016. The yield on U.K. 10-year government bonds fell three basis points to 1.29 percent.

©2018 Bloomberg L.P.