British pound falls as lawmakers rule out delayed Brexit
Staff Writer |
The British pound dipped against major currencies as a much-anticipated amendment to postpone Brexit was rejected by the British parliament on Tuesday night.
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The British House of Commons on Tuesday voted 321-298, with a majority of 23, against an amendment from Labor's Yvette Cooper for Brexit to be delayed by nine months if no deal is agreed by Feb. 26.
The latest development came as British MPs voted on a series of amendments to modify the prime minister's Brexit plan after it was voted down by a historic margin on Jan. 15.
The pound fell by 0.7 percent against the U.S. dollar and 0.8 against euro while it was down by some 0.1 percent against both currencies just before the parliament vote began.
Out of the seven amendments, only two were passed. One is a non-binding call on the government to rule out no-deal Brexit and the other demands replacing Brexit backstop with "alternative arrangements".
The vote gives May a mandate to return to Brussels to say the Brexit deal is likely to win in the British parliament if changes are made to the Irish border issue. However, the EU has insisted that the Irish backstop is part of the withdrawal agreement and is not open for renegotiation.
The pound has roared higher in recent weeks as investors discount the chances of the UK crashing out of the EU without a deal, said Luke Trevail, currency analyst at TorFX, before the vote, believing it was put to the test at the parliament vote on various amendments.
Neil Wilson, analyst at Markets.com, was quoted by the BBC as saying the pound's drop is "quite a comedown".
"[It] is showing how the pound remains intensely sensitive to Brexit news flow, and partially how the market had put some faith in the Remainers/soft Brexiters forcing concessions from the government," he says.
The Backstop plan is one of the biggest stumbling blocks to the Brexit deal. It is designed to avoid border checks between Northern Ireland and the Republic of Ireland. It is considered by some British especially Brexiteers to be a trap to retain Britain in a customs union with the EU and pragmatically delay their "divorce".
In less than two months for Britain leave the EU on March 29 by default, British business community keeps pleading for an orderly Brexit while implementing contingency plans for a possible no-deal Brexit.
Responding to the parliament vote, Carolyn Fairbairn, Director-General of the Confederation of British Industry (CBI), said: "This is another deeply frustrating day for British business. The never-ending parliamentary process limps on while the economic impact of no-deal planning accelerates."
Fairbairn said in a statement that the amendment calling for replacing Brexit backstop with alternatives "feels like a throw-of-the-dice", warning it won't be worth the paper it is written on if it cannot be negotiated with the EU.
"Firms will welcome confirmation that a majority of MPs oppose a no deal outcome. But rejecting a no deal doesn't get a deal. Until MPs can agree a solution, delay will do nothing to lift the threat of an economic cliff edge that is draining money from the UK," Fairbairn said. ■