Sterling is making a bright start to the week in which the UK government is widely expected to trigger Article 50 and begin formal talks on its EU exit.
The pound is 0.41 per cent higher against the dollar, outperforming its major peers at $1.2224, and is also up 0.27 per cent against the euro
British prime minister Theresa May is poised to begin the UK’s exit from the EU as early as tomorrow, assuming she sees off an attempt by rebel MPs to add amendments to the Article 50 bill in the House of Commons later today.
If the bill passes without objection, it is likely to pass through the House of Lords, giving Ms May the room to announce the triggering of the clause in the EU’s Lisbon Treaty when she addresses MPs on Tuesday.
The pound’s immediate post-Brexit vote decline has stabilisead since June, with the currency settling between a trading $1.20-$1.26 range since the start of the year.
“Article 50 itself is likely to be a non-event and shouldn’t come as too much of a surprise,” said Chris Turner, head of FX strategy at ING who notes that “recent speculative positioning shows a significant build in short sterling positions, likely in anticipation of growing political risks”.
“What matters more is the initial response by EU officials – in particular the order of priority for negotiations and any rejection of the UK government’s ‘Clean Brexit’ strategy,” adds Mr Turner.
Away from Brexit, a looming Federal Reserve rate hike this week – its third since the the financial crisis – has helped boost the dollar at the expense of the pound and push the difference in borrowing costs between the UK and US to a 25-year high.