London’s blue-chip was higher this morning after UK government sources confirmed a key Brexit vote will be held in Parliament next week.
Sterling was up against the euro and the yen, but flat against the dollar.
With Prime Minister Theresa May surrounded by opponents of her proposed withdrawal deal, there are fears that a constitutional crisis could result should MPs throw out her deal when they vote on 15 January.
This was reflected yesterday morning in a weaker pound and a lower FTSE 100.
Brexit uncertainty takes its toll
Last month, a vote in the House of Commons was postponed as Mrs May was facing defeat. But it is understood there will be no further postponement.
The FTSE 100 was 0.69% higher in early trading this morning at 6,858.07, and the FTSE 250, which is more representative of domestic British business, was 0.67% higher at 18,096.54.
Sterling was up 0.24% against the , at €1.1157, and 0.21% stronger against the , at 137.9950 yen. Its value against the was unchanged at $1.2780.
However, since autumn, global fears of an economic slowdown have impacted markets across the world, so it is quite difficult to disentangle any Brexit effect from wider concerns.
Sterling may give a more reliable reading of market sentiment, as its value is more closely linked to market views of the economy’s prospects. It stood at €1.1343 on 8 January last year, reaching a 12-monthly high of €1.1582 on 16 April and a low of €1.1005 on 28 August.
Against the dollar it was trading at $1.3568 on 8 January last year, with a 12-monthly high of $1.4338 on 16 April and a low of $1.2489 on 11 December.
Its yen value was 153.425 yen on 8 January last year, with a 12-monthly high of 156.035 yen on 1 February and a low of 136.055 yen on 3 January this year.
“Backstop” proposal is key issue
Ahead of next week’s vote, there are frantic attempts to persuade waverers to back the proposed agreement. Pro-European Union MPs are told that the alternative is a “no deal” outcome that would leave the UK more separated from the EU than would be the case under Mrs May’s plans, while pro-Brexit MPs are warned that the whole process could come to a halt in the absence of Parliamentary approval.
Furthermore, the fact that the UK cannot leave the backstop without EU agreement has led to criticism. It is thought the government will to reassure MPs on the backstop issue over the coming days.