Pound up on hopes of softening opposition to May's Brexit deal

On Monday night, Parliament wrested control of the Brexit process from the prime minister after a number a Conservative MPs defied a three-line whip to defeat the government.

Politicians will now hold a series of indicative votes on Wednesday exploring other options for Brexit. It means the prospect of a soft departure, a lengthy delay or even revoking Article 50 cannot be ruled out, and that has rallied many on the right of the Conservative Party.

Jacob Rees-Mogg, who with the pro-Brexit European Research Group that he chairs has been instrumental in thwarting the prime minister, has now indicated he could back the deal.

In a podcast for the Conservative Home website, he remarked: “I’ve always thought that a no deal is better than Mrs May’s deal, but that Mrs May’s deal is better than not leaving at all.

“I’m concerned that her deal is in no way a good deal. Against that there are the threats of a long delay, and many people in Parliament who want to frustrate the result of the referendum. So we are in a very difficult political situation.”

Michael Fabricant, another Eurosceptic Conservative, echoed Rees-Mogg, tweeting that he had come to the “dreadful conclusion” that the country was facing a straight choice between May’s deal or no Brexit.

Not long after 1300 GMT, sterling was trading up 0.45% against the euro at 1.17 and up 0.3% at 1.32 against the dollar.

However, not all Brexiteers were convinced. Sammy Wilson, spokesman for the Democratic Unionist Party, reiterated that his party – which props up the government – could not back May’s deal. “Why would we vote for a deal that doesn’t deliver Brexit anyhow?” he told the BBC.

And according to Sky News, overall the DUP considers a long extension preferable to May's deal. Some in the party believe that it there was a lengthy extension, it would force the prime minister to step down, raising hopes she would be replaced with someone better able to force through an improved deal.

Market analyst David Cheetham at XTB, felt that while the continued uncertainty is not good for the pound, the eventual outcome is looking increasingly favourable.

"Assuming no-deal doesn't rear its ugly head once more, then the outcomes seem to range from slightly positive for sterling (May’s deal) across a spectrum of increasingly supportive alternatives (customs union, Norway+) to the most beneficial which would be a second referendum.

"May’s deal has now shifted from the best case scenario for the pound in a two-horse race with no-deal, to the worst-case in an increasingly more positive field. There will no doubt be substantial intra-day volatility driven by the latest headlines on this front, but unless the prospect of no-deal looks anything more than remotely possible then the path of least resistance for the pound remains higher. "

Joshua Mahoney at IG said Monday evening was a "rare event" as a breakthrough was made to wrest temporary control of the Brexit process away from the government, on Wednesday at least.

While it is not popular with Theresa May, "it has certainly raised hopes that we could find a way out of the recent impasse", he felt.

"There is certainly a degree of scepticism surrounding tomorrow’s votes, given their non-binding nature. However, even if parliament fails to garner enough support for any one single form of Brexit, at least we are progressing and can move on towards finding an ultimate solution. The edge cases of a second referendum or revoking article 50 are unlikely to be on the bill for Wednesday, yet a failure to agree on any single form of Brexit could be the spark to then raise the question of whether MPs prefer to leave without a deal or not leave at all."