Pound pops as Labour moves to prevent hard Brexit

The UK opposition party's shadow Brexit secretary, Keir Starmer, is due to announce plans to table amendments to the government’s EU withdrawal bill aimed at preventing a 'hard Brexit'.

Labour will work with colleagues from other parties to try to change the withdrawal bill Brexit legislation in an attempt to strengthen parliament’s say.

The news sent the pound higher on Monday, with sterling rising 0.6% on the dollar to 1.4221 and 0.2% versus the euro to 1.1459.

“News that Labour will table amendments to the EU withdrawal bill to prevent a hard Brexit if parliament rejects the outcome of the Brexit talks is being taken well by the market,” said Jane Foley, head of currency strategy at Rabobank. “It means less chance of a hard Brexit.”

Market analyst Michael Hewson at CMC Markets noted that GBPUSD pushed up to 1.4220 last week just shy of trend line resistance from the 2014 highs.

"A move through 1.4220 retargets the 1.4350 highs. As long as this level holds we could drift back down to the 1.3980 area. A move below 1.3970 runs the risk of a return to the lows last week."

Currency analysts at BoA Merrill Lynch said the pound would soon begin to rally anyway, reflecting April seasonality, "which tends to rally no matter what the political/macro backdrop".

Within the G10 currency complex, "there is no stronger seasonality than in GBP through April", with cable having rallied every single year for the past 14 years, even amid financial crisis, general elections and the Brexit referendum.

Merrill said it suggests "a consistently strong underlying flow which has trumped these idiosyncratic factors. A combination of the end/start of the UK tax year and a heavy month of dividend payments by UK corporates are factors which we think are at play driving GBP strength during April."