Pound climbs higher as Theresa May vows to fight no-confidence vote triggered by Tory rebels

If the PM survives vote of no confidence, it 'would in theory reduce the chances of a no-deal Brexit', one analyst said

The pound rose on Wednesday morning after Theresa May said she would contest a planned vote of no confidence by her Tory party colleagues.

The prime minister said she had cancelled plans to visit Dublin for more Brexit negotiations and will instead stay in London to protect her leadership.

The pound was up 1.4 per cent against the dollar at $1.2660 by late afternoon and rose 0.9 per cent against the euro to hit €1.1138.

Sterling had been below $1.25 earlier in the day, but began inching upwards against the greenback and the euro ahead of the prime minister’s statement.

Analysts said traders appear to be confident that Ms May will survive the vote on Wednesday night.

Connor Campbell, market analyst at Spreadex, said: “Even if the vote is an unwelcome distraction from the real issues at hand, a May triumph would in theory reduce the chances of a no-deal Brexit.”

However, other experts noted that the pound has a long way to go in terms of recovering to pre-Brexit levels.

Ian Strafford-Taylor, CEO of FairFX, said: “Theresa May has vowed to ‘finish the job’ following the vote of no confidence after pledging to put her ‘heart and soul’ into convincing MPs to back the terms of her Brexit deal. This is now out of her hands as the House of Commons face a secret ballot this evening. This means even further uncertainty for the UK, and uncertainty – especially in political stability – is one the biggest causes of volatility for currency.

“Compared to this time last year, the pound is down 3 per cent against the euro and down 6 per cent against the US dollar. It’s also down 15 per cent against both the euro and US dollar compared to the day before the referendum back in 2016. In the days and weeks to follow, whatever the outcome of this evening’s vote, it’s likely that the pound will continue to be impacted. ”

Jameel Ahmad, global head of currency strategy and market research at FXTM, said: “There are generally so many concerns around the broad political landscape with Brexit and also domestically in the UK, that it concludes with a vision that there is no light at the end of the tunnel for the British pound.”

“Indications that the EU is willing to consider compromises on a Brexit deal would be what is needed to help the British pound recover some ground, but that is unlikely to be the case.”

It emerged on Wednesday morning that Ms May faces a vote of no confidence in her leadership.

Sir Graham Brady, the chairman of the 1922 backbench committee, released a statement saying the threshold of 48 signatures – 15 per cent of the total number of Tory MPs – “has been exceeded”.

The prime minister lost control of her party after her decision to delay the parliamentary vote on the Brexit deal, which was scheduled for Tuesday evening.