Sterling fell by more than a cent against the dollar after a series of votes in the House of Commons last night which many perceived to have made a "no deal" Brexit more likely.
In a series of close votes, MPs voted to reject proposals that would have sought an extension to the Article 50 process if a deal on the terms of the UK’s exit from the EU had not been ratified.
The market's reaction to last night's political events was to view a no deal exit as more likely, sending sterling spiralling downwards to $1.30
David Cheetham, chief market analyst at XTB, said the past fortnight had seen a steady rise in the value of sterling against the dollar as investors felt the outcome of the votes would be a reduction in the risk of a no deal exit, and, as the opposite has happened, sterling had been sold off.
Trevor Greetham, head of multi-asset investing at Royal London Asset Management said if there was a Brexit deal, he would expect commercial property to be the asset class that benefitted most, as the returns from those assets were strongly linked to the health of the wider economy.
He added that if there was a no deal Brexit, he would expect sterling to fall by 10 or 15 per cent, which would help the returns of the FTSE 100 since the bulk of the earnings achieved by companies on that index are derived from overseas, and so worth more if sterling falls.
Most of the motions were rejected by MPs but one accepting the terms of the existing Brexit deal, but removing the "backstop" element of the agreement which would apply to the Irish border, was approved.
But any such a change to the deal must be approved by the EU, which has said it is not willing to renegotiate.
A vote rejecting no deal was also approved by MPs, but this was the only non-binding vote of the night, so the government can ignore it if it wishes.
david.thorpe@ft.com
