Pound falls as May’s revised Brexit deal deemed dead on arrival

Sterling tumbled on Tuesday as investors initial optimism over Theresa May’s new Brexit deal slipped away as legal risks over Irish backstop persist.

Pound sterling Source: Bloomberg

The pound lost ground against the dollar on Tuesday after investors optimism over the prospect of Theresa May’s new Brexit deal being passed in parliament were squashed by the UK Attorney General Geoffrey Cox.

Sterling slid as much as 1% against the dollar after Cox announced that legal risks persist over the controversial Irish backstop, dashing any hopes that the UK Prime Minister had at garnering sufficient support in parliament to get her new Brexit deal passed in a vote on Tuesday evening.

'Given the euphoria overnight, it’s a disappointment for sterling,' Neil Jones, head of currency sales for financial institutions at Mizuho Bank said.

'The market was looking for legal support in order to shift the vote tonight and push the deal through. Cox’s legal opinion on the matter will shift the market away from deal success expectations.'

Theresa May’s revised Brexit deal sends pound lower

By midday in London, the pound had fallen $1.13052, representing a 0.8% decline in the currency, with investors propping up sterling after it hit a low of $1.3005 earlier in the session. The pound faired even worse against the euro, with it tumbling 0.9% on Tuesday.

“Sterling has been knocked back on the news that Cox is not throwing all of his weight behind last night’s amendment to the Withdrawal Plan,” Rabobank International currency strategist Jane Foley said.

‘Sterling is the best-performing currency in the year to date implying that there is plenty of good news priced in. I think it could be on the back foot today unless May’s deal is passed.’

DUP deals major blow to sterling

In what has been a tough day for the pound, the Democratic Unionist Party (DUP) was on hand to ensure the currency suffered significant losses at the hands of investors after reports began to circulate that Arlene Foster’s party would vote against May’s revised Brexit deal.

The DUP’s decision to not support May’s new deal means that the prime minister will almost certainly be defeated in the House of Commons later tonight and will likely lead to Article 50 being extended.

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