Sterling held well at multi-month highs against the euro and dollar as traders weighed up whether lawmakers would back a key parliamentary amendment that would effectively take a no-deal Brexit off the table.
The UK parliament will debate and vote later in the day on Prime Minister Theresa May’s response to the overwhelming rejection of her Brexit plan earlier this month.
The main focus is on amendments which have been put forward by other lawmakers, especially one that provides for postponing the March 29 Brexit deadline should a divorce deal with the European Union not be approved by parliament by Feb 26.
That amendment is seen as the most likely to pass if the opposition Labour Party does back it as many have indicated.
If the amendment passes, “the pound could strengthen further lifting cable towards the $1.3300-level,” analysts at MUFG told clients, adding that failure to pass it could lead to the currency slumping all the way back to $1.3050.
Senior Conservative lawmaker Graham Brady has put forward another amendment, calling for the Irish backstop arrangement envisioned by May’s Brexit divorce deal to be removed and replaced with “alternative arrangements”. This is not expected to pass.
Voting is set to begin at 1900 GMT.
There is no economic data of relevance released expected today.