Pound rallies as investors take heart from Johnson Brexit defeat

British pound has recovered ground it lost since Johnson announced last week that he would suspend parliament.

by
    Sterling posted its biggest increase in six months on Wednesday after MPs voted to force Johnson to delay Brexit by three months [File: Angel Garcia/Bloomberg]
    Sterling posted its biggest increase in six months on Wednesday after MPs voted to force Johnson to delay Brexit by three months [File: Angel Garcia/Bloomberg]

    The pound rallied for a third day after parliament tore up UK Prime Minister Boris Johnson's Brexit strategy and denied his request for a snap election, tempering fears of further political turmoil.

    Sterling posted its biggest increase in six months Wednesday after lawmakers voted to force Johnson to delay Brexit by three months. An election is still on the horizon with the prime minister losing his majority earlier this week, but it may not come until after an extension to the deadline has been set, reducing the risk of chaotic exit from the European Union.

    The UK currency has recovered the ground it lost since Johnson announced last week that he would suspend Parliament for over a month ahead of the Brexit deadline, setting off a rebellion which ultimately led to lawmakers seeking to block him from pursuing a no-deal. It is headed for a weekly gain of almost 1%.

    Johnson plans to appeal directly to voters in a speech on Thursday "to decide what they want" through an election, according to a statement from his office. Still, he needs two-thirds of Parliament to back him in order to call one, and the opposition Labour party wants the Brexit delay to pass into law first.

    "My expectation is Brexit is delayed until Jan. 31 with an election after the initial deadline and before the end of January," said Neil Jones, heady of currency sales for financial institutions at Mizuho Bank Ltd. "A delay for both Brexit and a general election will continue to send the pound higher."

    The pound gained 0.3% to $1.2295, after rallying 1.4% on Wednesday. The currency also gained 0.2% to 89.85 pence per euro. 

    SOURCE: Bloomberg