Despite a brief uplift early on Friday, the pound finished last week on a low. This was caused by further stagnation of the backstop talks in Brussels, with a breakthrough still looking unlikely.
Early on Friday, the Prime Minister urged EU officials to make concessions with regards to the backstop, in order to get an agreement over the line. However, EU negotiator Michel Barnier remained immune to May’s plea, stating that the UK government has been presented with clear choices.
Talks are set to resume this morning, aiming for a breakthrough before MP’s vote on Theresa May’s deal tomorrow. If there is no substantial change before the vote, the chances of the deal getting through Parliament are likely to be slim. If it is rejected, MPs have been promised a vote on Wednesday on whether the UK should leave without a deal.
Sterling also came under renewed pressure after British Foreign Secretary Jeremy Hunt said on Sunday that Brexit could be reversed if lawmakers reject the government’s exit deal.
If they reject May’s deal again, we could see a brief uplift for the pound like last time. On the other hand, the possibility of a no-deal would still be on the table, which hasn’t fared well with sterling in the past.