The pound fell on Tuesday as MPs rejected the government’s proposed Brexit timetable. These losses were limited, and investors did not see this move as a significant increase in the chances of a no-deal exit. The pound was down 0.56% against the dollar and 0.38% against the euro close to midday. Though the pair managed to recover these losses later in the day.
Lawmakers agreed to the Brexit deal at second reading, they were unhappy with the proposed timetable. The government therefore withdrew the bill and are now waiting for the EU to respond to the request for an extension.
The extended timeline has marginally increased the uncertainty so there are unlikely to be any short-term aggressive pound rallies. Should the EU grant a long extension then analysts believe an election becomes the next logical step. If only a short technical extension is granted, then this may push MPs into supporting the withdrawal agreement but also risk a no deal otherwise. The EU may not wish to take this risk.
GBPUSD opened at 1.2946 and fell to a low of 1.2897 near midday before recovering slightly to close almost unchanged 1.2948
GBPEUR opened at 1.1615 and behaved similarly, reaching a low of 1.1598 before rising to 1.1623 when the session closed
The dollar gained 0.19% against a basket of rivals as there were reports of progress in trade negotiations between China and the US. Both Beijing and the White House indicated positive progress was being made towards a deal and the tariffs scheduled for December could be withdrawn. This had a positive knock-on effect for many trade-exposed currencies, with the New Zealand dollar being the biggest gainer, rising 0.3% against its US rival.
Elsewhere the Canadian dollar performed well, hitting a three-month high against its US neighbour as election results showed Prime Minister Justin Trudeau will be remaining in office for a further four years. His Liberal Party will be forming a minority government with the left-leaning New Democratic Party.
EURUSD opened at 1.1146 and dropped very slightly across the day, closing at 1.1140