The pound edged off 20-month lows yesterday as British Prime Minister Theresa May rescheduled a delayed vote in parliament on her Brexit plan for mid-January.
Sterling, trading at $1.26, inched higher as May confirmed the vote – postponed last week in the face of deep opposition – would happen in the week starting on Jan. 14.
With May facing deadlock in parliament over her deal to leave the European Union and the bloc offering few concessions so far, calls for a second Brexit referendum are growing louder.
Despite the tough task that May faces in winning concessions from the EU over the Brexit deal agreed on Nov. 25, most investors think the British parliament will eventually back a “softer Brexit” rather than a complete separation from the EU.
The US dollar weakened, with investors betting that growth concerns will prompt the Federal Reserve to slow its pace of interest rate hikes at this week’s meeting.
A rout on Wall Street following a spate of weak data globally has strengthened the view that the Fed’s widely-expected rate hike on Wednesday will usher in a slowdown, or even a pause, to three years of steady rate increases.
The prospect of a “dovish rate hike” is keeping the dollar – this year’s best performing major currency – in check.