British Prime Minister Teresa May's Euro-exit agreement was rejected by Parliament on Tuesday. The pound fluctuated and remained stable for the day, while the dollar fell against the euro as the U.S. consumer price index was disappointing.
Britain's parliament on Tuesday rejected Teresa May's secession agreement for the second time, exacerbating Britain's worst political crisis in decades, 17 days before the scheduled date.
The pound fell about 0.5% to $1.307 against the dollar, with a sharp intraday shock.
"The market has basically digested the impact of the agreement, which is why the pound has not broken through the key psychological support against the dollar," said Karl Schamotta, director of foreign exchange strategy and structural products at Cambridge Global Payments. "This may prolong the withdrawal process."
Britain currently lacks a clear way forward: no agreement to withdraw from Europe, postpone the withdrawal date of March 29, hold an early general election, and even hold a referendum again. Teresa May may even make a third attempt to win parliamentary support, hoping that if she chooses between a withdrawal agreement and staying in the EU, her conservative hawks may change their minds.
"Although the withdrawal agreement was rejected, the voting gap narrowed compared with January, and it seems that the problem is being solved by itself," Schamotta said. "This provides Teresa May with room for further consultation with the EU and an opportunity for parliament to conduct a series of further votes. This did not trigger a vote of no confidence in the Teresa May government or a successful vote of no confidence, paving the way for the pound to rise in the coming days.
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