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Pound recovery seen as short
Published on 12.10.2016 22:42

The pound has recovered some losses today after MP’s in the British parliament agreed to a full debate on The UK’s decision to leave the European Union.

At 7.35pm (GMT) the British currency was trading at US $1,2220 up from $1.2120 in yesterday’s trading.

For months British Prime Minister Theresa May had refused to discuss the conditions of Brexit and vowed to just go ahead and invoke article 50 (the 2 year process for Britain to leave) but bowed to constant pressure and agreed to a debate on the motion.

The news sent the pound higher as investors saw an opportunity of a delayed Brexit or even an outside chance that there may eventually be a parliamentary vote on the matter where the decision may be reversed.

"After weeks of tough rhetoric pushing sterling into a trading environment closer to an emerging market currency, the government may aim to stabilize markets, with its rhetoric and suggestions now possibly shifting in tone," said Morgan Stanley's head of currency strategy, Hans Redeker.

Some say the talks will be fruitless as there is no legal basis for a parliamentary negotiation on Brexit and Prime minister May will continue on the exit path shortly after the debate which will once again pressure the pound,

"There is a fine line to walk as Mrs May's Conservative Party wants a clean split from Europe said. Mr Redeker.

"In addition, giving in too much, even before Article 50 negotiations have started, shifts the negotiation advantage towards the EU. Hence, the pound's rebound should be limited and followed by a decline," he added.

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Andrew Masters


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