LONDON (Reuters) - The pound recouped earlier losses on month-end rebalancing flows and edged higher on Thursday as investors waited for parliament’s next step to break the Brexit impasse as opposition leaders gathered to discuss tactics.
Against the dollar, the pound edged 0.1% higher to $1.2360. It had fallen to a two-week low of $1.2303 in early London trading but some dollar weakness and month-end flows boosted demand for the single currency.
“Support for sterling down at the 1.2290-1.2300 area held again, despite strong stocks and it does seem that month and quarter end flows for rebalancing had a greater impact than politics today,” said John Marley, a senior FX consultant at FX risk management specialist, SmartCurrencyBusiness.
The pound had come under some selling pressure earlier after the European Union’s Brexit negotiator, Michel Barnier, said Britain had yet to provide “legal and operational” proposals for an agreement on exiting the bloc at the Oct. 31 deadline.
The UK Supreme Court dealt Prime Minister Boris Johnson a blow this week when it ruled he had unlawfully suspended parliament. The ruling reinforced belief that Britain was unlikely to leave the EU without a deal on Oct. 31, but parliament remains split, early elections look inevitable and Johnson remains adamant that Britain will leave at the end of next month.
Against the euro, the pound edged 0.2% higher at 88.48 pence. It had weakened 0.3% earlier to 88.86 pence.
“We don’t know where things will go with Brexit. That’s being manifested in sterling more than any other asset,” said Fahad Kamal, chief market strategist at Kleinwort Hambros.
“What we have done in the face of unknowable political outcomes and daily volatility is to make sure our portfolios can deal with any big moves, big rallies or big falls,” he added.
(Graphic - Sterling in September, tmsnrt.rs/2mQpmWb)
Implied volatility gauges in sterling/dollar - a measure of expected swings in a currency - rose. They had fallen after the court ruling
Chartists see the next big support level for sterling at around $1.2280 - the 50-day moving average, a technical indicator that refers to the currency’s average closing price over the past 50 days.
British opposition Labour leader Jeremy Corbyn will meet other opposition leaders later in the day, as they discuss how to stop Johnson from quitting the EU on Oct. 31 without a deal if he fails to secure an agreement with Brussels by Oct. 19.
Reporting by Sujata Rao; Editing by Susan Fenton and Kirsten