Value Of The Pound Declines As Government Loses Contempt Vote

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The value of the sterling dropped last Wednesday after the government of Theresa May was found to be in contempt of parliament for failing to publish the Brexit legal papers.

The value of the pound had risen back from fresh lows that it recorded earlier in the day after the European Court of Justice (ECJ) implied that the United Kingdom could change its mind about Brexit by withdrawing Article 50 unilaterally, putting an end to Brexit.

The top court of the European Union has been considering the question of whether the United Kingdom can decide not to go ahead with Brexit following a legal challenge by campaigners.

The formal legal recommendation was published on Tuesday. It cites the “sovereignty” of the United Kingdom in treaty-making matters. It says that withdrawal “may be revoked at any time” during the period of the negotiations, as long as it is done in good faith.

The value of the sterling was up by 0.55 percent at $1.2795. It increased by 0.29 percent to hit €1.1239.

However, the contempt vote sent the value of sterling down against the dollar to $1.267. It is the lowest level recorded since June 2017.

The House of Commons backed a motion that demands a full disclosure of the legal advice that was given to the government surrounding the Brexit deal of Theresa May by 311 votes to 293.

The embarrassing defeat of the Prime Minister dealt a blow to the value of the sterling, which had recovered after the statement from Campos Sanchez-Bordona, the Advocate General of the European Union.

A research analyst at FXTM, Lukman Otunuga, stated: “Sterling’s aggressive appreciation to this news continues to highlight how explosively volatile and extremely sensitive the currency has become to Brexit headlines.”

With the MPs set to debate the deal before the vote, Simon Harvey, an FX analyst at Monex Europe, said that the current forecasts are leading “towards a marginal loss by May’s government in Parliament where a further fudge will occur in an attempt to please enough MPs to favour the draft deal in a second running.”