Sterling weakens and doubts multiply before Parliament vote on Brexit

LONDON (Reuters) – The British pound lost nearly 1 percent against the dollar on Thursday after peaking at nine months as traders geared up for the third parliamentary vote on this week's Brexit.

On Wednesday, the pound sterling recorded its largest single-day gain against the dollar since last April, after UK legislators voted vividly to reject a Brexit without agreement.

Investors expect the result to bring Eurosceptic parliamentarians to finally support the unpopular agreement that Prime Minister Theresa May has negotiated with the EU, or a long delay over the Brexit that could possibly cancel the result of the 2016 referendum. [BREXIT]

Both scenarios would be positive for the pound sterling excluding a disorderly exit from the European Union.

However, part of the optimism has given way, no sign that the legislators can reach a consensus on the amendment of the May agreement, so that it is acceptable for all parties and for the EU.

Tim Graf, head of macro strategy at State Street Global Advisors, said the odds of a Brexit without agreement had dropped to less than 5% and that he had described it as positive to the book. But he warned that the risks still remained.

"There is a progressive optimism in the prices … It is clear that the parliament begins to exercise with more force," said Graf.

But he added: "There is always a chance that the EU will not grant any extension if it just wants to try to get this deal through … it's there that the caution s & # 39; 39; required. "

MEPs will vote Thursday after the postponement of Britain's departure beyond the EU beyond 29 March. However, the 27 EU members must approve the extension.

May is also pushing lawmakers to vote again next week on an agreement that they have twice rejected.

Sterling has rocked this week between $ 1.30 and $ 1.33, and has had some very unstable moments since the June 2016 Brexit referendum.

It jumped more than 1% against the dollar and the euro on Wednesday as Parliament voted categorically against leaving without a transition agreement.

It peaked at $ 1.3380. Against the euro, it had reached 84.72 pence, coming close to the recent highs of 22 months

However, it subsequently withdrew from these levels as traders looked at the range of opportunities that opened up, including a second referendum or a general election.

At 10:45 GMT, the pound was down 0.9% to 1.3229 dollar. Compared to the euro, it was down 0.6% to 85.46 pence.

Option markets post an implied volatility of the British pound – a gauge of expected currency fluctuations – still high, with two-week bonds hitting troughs to a week on Wednesday.

Volatility could also come from amendments tabled by legislators before the vote; one seeks a second referendum on Brexit, while another seeks to exclude it. If the first is adopted, the book could still rally, hoping that voters will cancel the results of the 2016 referendum.

Sterling slides 9 meters high; implied flight remains high – tmsnrt.rs/2FchsgD