Pound up after Theresa May wins Tory confidence vote
Sterling recovers some ground as investors see the vote by Tory MPs bolstering the chances of a soft Brexit or even no Brexit.
Wednesday 12 December 2018 22:59, UK
The pound has reacted positively after Theresa May saw off a Tory vote of confidence in her leadership - but wobbled when the size of her majority became clear.
Sterling has had a rocky ride this week amid the growing political crisis over Brexit, with sharp falls first focused on the delayed parliamentary vote on the PM's Brexit deal with Brussels.
It later fell further - to fresh 20-month lows of $1.2475 - when confirmation came early on Wednesday that there was enough support among Conservative MPs to secure the confidence ballot.
But the currency rallied against both the dollar and euro later as it became clear Mrs May would see off that challenge to her authority.
It was trading at $1.2652 in the wake of the announcement that she had secured a majority - but that value briefly slipped back to just below $1.26 when it emerged that majority consisted of 83 backbenchers.
It suggested investors were less than convinced by that level of support.
The pound was also up 0.6% versus the euro on the day - representing a slight pull-back on the day's high.
The result means the PM cannot face a fresh Tory confidence vote for at least another year, though she earlier told backbenchers her time at the helm would be limited as she would not fight the next election as Conservative leader.
Traders said it left investors asking themselves what the Tory turmoil meant for the Brexit process, including whether Mrs May's victory over the hard Brexiteers in her party bolstered the chances of a "no Brexit" scenario.
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Commenting on the possibilities as the vote loomed, Ranko Berich, head of market analysis at Monex Europe, said: "If she does survive, her situation will be marginally improved as she will be in a stronger position to argue that parliament's options are her deal or no deal."
He added: "Although the prospect of a marginally strengthened May removes some downside risk for sterling, any relief rally will be limited unless tonight's vote demonstrates a sudden increase in Tory support for May's deal."
The PM had to postpone a visit to Dublin on Wednesday during which she was due to discuss "reassurances" over the backstop element of her agreement with Brussels.
While MPs were on course to reject the plan before the parliamentary vote was dramatically pulled, it had secured the tentative backing of business groups.
They have since urged Mrs May to get on with it as the clock ticks down to 29 March when the UK is due to leave the EU.
In her response to the confidence result, the CBI director general Carolyn Fairbairn said: "This vote was a chaotic detour that needs to be put to good use.
"Politicians must finally stop the endless infighting of the past 30 months and come together to secure a workable Brexit deal. Companies and the country have had enough of chaos.
"Uncertainty is throttling firms and threatening jobs - not in the future but right now."
UK plc remains far from united on the issue.
A 28-strong group of Brexit-supporting business leaders - including Sir Rocco Forte and JD Wetherspoon boss Tim Martin - signed an open letter on Wednesday night urging the PM to preside over a "managed" no-deal Brexit.
They argued that leaving without a deal would "give us the flexibility to embrace global opportunities, extend global trade and focus outwards".
"It would give the government the chance to run our economy and country in a way that operates in the best interests of us all," the document said.