Sterling set for third weekly drop with UK Brexit vote in focus

FILE PHOTO: Pound Sterling notes and change in a cash resgister in September 21, 2018. REUTERS/Phil Noble/File Photo

LONDON (Reuters) - Sterling fell on Friday and was headed for a third consecutive week of losses as caution grew among investors about the British parliament’s vote on Brexit next month.

Prime Minister Theresa May said on Thursday she was focussed on persuading MPs to back her divorce deal with the European Union in a Dec. 11 vote, rather than preparing a plan B.

May secured an agreement with EU leaders on Sunday that will see Britain leave the bloc in March next year with continued close trade ties, but the odds look stacked against her getting it through a deeply divided British parliament.

“We expect the deal to be rejected by parliament although we give the highest probability by far to the UK ending up with some form of the May deal and/or the Norway Plus option,” MUFG analysts wrote in a note.

Those concerns were reflected in the currency markets, with the British currency down nearly 3 percent in the last three weeks and derivative markets indicating more hedging activity before the vote.

The pound at 1550 GMT was down 0.3 percent at $1.2756 against a resurgent dollar. Against the euro, it was also down 0.3 percent at 88.24 pence.

If a “No” from parliament on Dec. 11 is interpreted as a slide towards a no-deal, the pound may tumble. But if a second referendum — and a Remain outcome — becomes a possibility, the opposite is likely.

Reporting by Saikat Chatterjee and Tom Finn; Editing by Richard Balmforth