Pound set for 'turbulent week' amid Brexit showdown

The British pound was under pressure on Monday as traders prepared for a potentially messy week of Brexit debate after a weekend filled with speculation that there may be an early election.

Parliament was set to reconvene on Tuesday, following their summer break, with the Labour Party expected to introduce new legislation that could block a no-deal Brexit scenario.

The proposal was thought to have significant support from around 20 Tory MPs, though a senior source in the office responsible for Conservative party enforcement told Reuters that new Prime Minister Boris Johnson has warned would-be rebels to toe the party line or face being purged.

However, that threat saw Johnson accused of forcing MPs into a corner.

David Gauke, the former justice secretary, said: "It does seem to me that they’re almost goading people into voting against the government because I think their strategy, to be honest, is to lose this week and then seek a general election having removed those of us who are not against Brexit, not against leaving the European Union, but believe we should do so with a deal."

The pound dropped 0.3% to $1.2130 in early London trading, and was down 0.4% against the euro at 90.80p.

Michael Hewson, chief market analyst at CMC Markets UK, said: "The pound is coming under early pressure over weekend headlines that appear to suggest that a possible election could come sooner rather than later. This week has the potential to be a significant sentiment shifter if MPs succeed in passing legislation that might block a no deal Brexit, with the tug of war inside the Conservative party set to play a key part in determining how the pound fares in what is likely to be a turbulent week."

The pound saw volatile trading during the previous week after Johnson's government announced its plans to prorogue Parliament for around a month and was widely criticised by opponents as an attempt to force through a no-deal Brexit on the current 31 October deadline.