The pound has bounced back on renewed hopes that Britain and the EU are on the verge of a Brexit deal.
Sterling rose by almost two cents against the US dollar on Tuesday to $1.30.3 as it was confirmed the cabinet was to meet on Wednesday to discuss the terms of a potential withdrawal agreement.
It was also up by more than half a cent against the euro to hit an eight-month high above €1.15.
However, gains ebbed away as a string of Brexiteers and Northern Ireland’s Democratic Unionist Party lined up to say the text was unlikely to be acceptable.
Labour said it would have to meet its six tests.
Sterling had tumbled close to $1.28 against the dollar on Monday after a weekend of political turbulence and reports that a number of ministers were on the verge of resigning over Theresa May’s Brexit plans.
Mrs May said in her annual address to the Lord Mayor’s banquet on Monday that negotiations were approaching the “end game” though cautioned that significant issues still stood in the way of an agreement.
On Tuesday, Cabinet Office minister David Lidington told the Commons that the government’s political and legal position on the proposals would be put to MPs when Brexit negotiations had concluded.
News of the looming cabinet meeting on the draft agreement emerged on Tuesday evening.
The pound has been gripped by volatility amid uncertainty about whether the UK will leave the EU next March without a trade deal in place.
Simon Harvey, market analyst at Monex Europe, cautioned that more work lay ahead even if agreement was reached between the UK government and Brussels.
“Should a deal be put on the table, sterling will likely rally up towards the $1.34 level. However, this rally may be short-lived as a key hurdle in the Brexit timeline remains – getting a deal through Parliament.”
Experts including the Bank of England expect a sharp shock to the economy if there is a “no deal” withdrawal and the UK’s independent fiscal watchdog has drawn comparisons with the impact of the three-day week in 1974.
Officials and businesses have been working on contingency preparations for such a scenario.
Mr Kipling owner Premier Foods said on Monday that it would soon start stockpiling goods as it looks to protect itself from the risk of delays at ports.
Responding to the latest announcement by Downing Street Andrew Gray, head of Brexit at business services firm PwC, said: “Whilst today’s developments have reinforced our optimism that a deal between the EU and the UK is the most likely outcome, we still urge business to continue preparing for both a deal and no deal scenario until the deal is ratified.
“Whilst there is still uncertainty about the exact details of our future relationship with the EU, the emerging political agreement will provide helpful clarity on the boundaries of the relationship, which should allow businesses to
progress with medium-term planning for post-Brexit scenarios. We urge businesses to continue to prioritise this.”
(c) Sky News 2018: Pound bounces back on latest Brexit hopes