LONDON, Oct 28 — Sterling was little changed today as traders waited to see whether Brussels would grant Britain a three-month Brexit extension, while British lawmakers were expected to vote on whether to hold an early general election.
The European Union will today “most likely” agree to delay Britain’s departure from the bloc until January31, said a source close to French President Emmanuel Macron, who last week prevented the EU from reaching a decision on the delay.
British Prime Minister Boris Johnson, who pledged to deliver Brexit on October 31 “do or die”, was forced to request a delay after parliament rejected the sequencing of ratification of his exit agreement.
Johnson is demanding parliament approve an election on December 12 in return for having more time to approve his deal. But he needs the support of two-thirds of parliament’s 650 lawmakers for a new election. A vote is due later today.
Sterling was last trading flat at US$1.2836 (RM5.37) and at 86.36 pence against the euro.
“People don’t want necessarily to be involved with the pound, selling or buying it,” said Neil Jones, head of European hedge-fund sales at Mizuho.
The derivatives market was also quiet, with overnight and one-month sterling implied volatility gauges falling slightly on Monday.
With the EU looking ready to agree to a third Brexit extension, “one element of certainty is coming back and should support sterling,” Jones said, adding that he is suggesting to clients that the pound will trade higher.
“For me, the potential certainty ahead is a lot higher than what the market is factoring in,” Jones said.
Leveraged funds that bet on the direction of sterling reduced their short positions on the pound in the week to October 22 to US$4.16 billion, a four-month low, according to CFTC data on Refinitiv.
Still, those levels showed that market participants remained overall negative on sterling compared with April 2018, when speculators were broadly long the British currency. — Reuters
