STERLING has climbed against both the dollar and the euro this morning following a dramatic vote on Theresa May’s Brexit deal last night.
The Prime Minister suffered an embarrassing defeat with her Brexit deal being rejected by 432 votes to 202.
But the vote has caused the pound to rally and experts say this is because a “softer” Brexit deal is now likely to be on the cards.
Sterling had climbed to 1.284 against the dollar at the time of writing at 12pm – up from 1.270 before the vote.
While the pound stood at 1.129 against the euro compared to 1.116 just before the vote.
Why has the pound rallied?
Laith Khalaf, senior analyst at financial provider, Hargreaves Lansdown said: “Sterling gained ground following the vote, but only recovered ground it lost earlier in the day.
“Markets think a softer Brexit may start to take shape now the vote has failed, as Parliament gains greater control of the process.
“This is a change in dynamic, as previously Government failures have heightened expectations of a hard Brexit, and have weighed sterling down.”
Economic research firm, Capital Economics added: “The resounding defeat of May’s Brexit deal in Parliament by a huge 230 votes is a very bad result for the Prime Minister but could prove to be a good result for the near-term outlook for the economy and the pound.
“Tonight’s result may therefore raise the chances of our “fudge and delay” scenario. That envisages a softer Norway-plus style Brexit being agreed later this year, thereby reducing the uncertainty that has been hampering economic growth and holding down the pound.
“Overall, if tonight’s catastrophic defeat for the Government leads to a consensus in Parliament, then it could actually mark the start of an upturn for the economy and the pound.”
Ian Strafford-Taylor, chief executive of currency expert FairFX, also believes the rally could be down to the prospect of a softer Brexit. He said: “The pound rallying this morning could be an indication of a couple of things.
“Firstly, investors seem to believe that Tories will win the confidence vote tonight with DUP support for the Government as well as Tory members who voted against the deal.
“Secondly, investors might also be of the opinion that we’ll now escape a hard Brexit and or no deal situation. One of both of these factors could be behind the pound rallying compared to pre-vote levels.”
Will sterling continue to rise against the euro and dollar?
Mr Khalaf warns that currency swings are still on the cards. He said: “Clearly there’s still no certainty to be had, and today’s vote of no confidence provides another pinch point for currency markets, so we can expect further swings in sterling as events develop.”
Michael Brown, senior analyst at currency firm Caxton FX echoes this point, saying the pound “is not out of the woods yet”.
He said: “Sterling rallied around 1.5 per cent in the aftermath of yesterday’s vote however the pound is not out of the woods yet with both tonight’s no confidence motion as well as a consensus on Brexit yet to be reached.
How can I get the best currency rates?
WE spoke with Hannah Maundrell, editor-in-chief at money.co.uk to find out how you can guarantee the best rate when you go on holiday.
- Don’t buy cash at the airport – you’ll always be able to beat the rate with a bit of forward planning.
- Compare travel money companies online – factor in delivery costs and choose the option that gives you the most cash to spend on holiday. If you’ve left it until the last minute order online for airport collection so you get the best of both worlds.
- Use comparison tools – MoneySavingExpert’s TravelMoneyMax enables you to compare pick-up and pre-order rates.
- Don’t pay for travel money with a credit card – it’s likely you’ll be charged a cash withdrawal fee which adds to the cost.
- Top up a prepaid card to lock in your rate now – choose your card and read the T&Cs carefully as some apply hefty fees. WeSwap, FairFX and Caxton FX are all worth checking out.
- Always choose to pay in the local currency rather than sterling – this will help you avoid sneaky exchange fees.
“Firstly, while it is our expectation that the Government survives such a vote due to the Conservative party and the DUP wanting anyone but Mr Corbyn as Prime Minister, the downside risk of a shock result and a general election remains.
“Such a result would exert significant downside pressure on the pound due to the heightened risk of a Corbyn government as well as prolonging the uncertainty that has been plaguing sterling over the past 12 months.
“But the best-case scenario for the pound remains an extension to the article 50 negotiating period which would provide markets with some degree of certainty over the coming months.
“Such a move looks set to cause significant upside movement in the pound, with sterling likely to push towards $1.30 and above.”
Has the pound returned to pre-referendum levels?
Ian Strafford-Taylor, chief executive of currency firm FairFX adds that while the pound has rallied for now, it is still down compared to its pre-referendum levels.
He said: “The referendum results back in June 2016 marked the start of a rollercoaster journey for the pound, which is still yet to return to its pre-Brexit rates against the euro.”
The pound hovered at about 1.46 against the dollar before the referendum, and at about 1.31 against the euro.
More on money
When there are fluctuations in currency, it can impact holidaymakers meaning they get more or less buck for their pound.
Here’s how YOUR MP voted in last night’s crunch Brexit poll.
Plus, we look at whether there could be another EU referendum and how a second Brexit vote could happen.
We pay for your stories! Do you have a story for The Sun Online Money team? Email us at money@the-sun.co.uk or call 0207 78 24516. Don’t forget to join the Sun Money’s Facebook group for the latest bargains and money-saving advice.
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News Pictures Pound climbs higher against dollar and euro after Brexit vote
You don’t have to pack away your bikini just because you’re the wrong side of 20. These body-beautiful stars reveal their secrets to staying in shape and prove you can smoulder in a two-piece, whatever your age. Read on and be bikini inspired!
TEENS
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Kim says: “I am no super-thin Hollywood actress. I am built for men who like women to look like women.”
https://www.thesun.co.uk/wp-content/uploads/2019/01/Pound-dollar-16-Jan1.png?strip=all&w=691
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