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Sterling weakens as UK requests Brexit delay

LONDON (Reuters) - Sterling weakened on Friday as doubts swirled over British Prime Minister Theresa May’s attempt to further delay Brexit.

FILE PHOTO: British Pound Sterling banknotes are seen in a counter machine at the Money Service Austria company's headquarters in Vienna, Austria, November 16, 2017. REUTERS/Leonhard Foeger

May wrote to Brussels asking to delay Britain’s EU departure until June 30 to allow lawmakers to agree a withdrawal deal.

But France and the Netherlands expressed doubt about the plan and that, combined with lingering fears of a no-deal Brexit, sent the pound to a session low of $1.3014, down 0.4 percent on the day.

The impact of a long Brexit delay on sterling is unclear. The pound would gain if a delay led eurosceptic lawmakers to back the deal May negotiated with the EU or brought about a reversal of the 2016 Brexit referendum.

For most of March the pound was stuck near $1.31.

“The chances of a no-deal remain remote but at the same time a satisfactory outcome anytime soon also seems highly unlikely and this is containing the pound in a fairly narrow trading range,” said David Cheetham, chief markets analyst at XTB.

Investors concerns about big swings in the pound have subsided somewhat according to one-month implied volatility gauges which on Friday fell to a four-week low.

Britain’s exit from the EU, nearly three years in the making, is now in doubt because the British parliament cannot decide what exit terms it wants.

UBS Global Wealth Management said it foresees a long extension to Brexit, because it doubted May’s attempt to build a cross-party consensus would succeed and expected the pound to remain volatile.

May is talking with opposition lawmakers to create a cross-party consensus to break the Brexit deadlock, but Labour leader Jeremy Corbyn said she had not moved far enough in a first round of the talks.

Reporting by Tom Finn, editing by Larry King, William Maclean

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