Pound sterling nudges higher but 'Brexit' uncertainty caps gains

The British pound recovered from 2-1/2 week lows on Tuesday but gains were limited because of continuing uncertainty about whether Prime Minister Theresa May can see off her opponents and secure Britain an exit deal from the European Union.

May told parliament on Monday that the Brexit deal with Brussels was 95 per cent complete, and she urged restive lawmakers to back her in the final stages of Britain's exit from the EU, saying talks were in their most difficult phase.

But opponents both within her own party and in the opposition have stepped up criticism of the deal she is trying to get, even if an imminent leadership challenge appears less likely.

Analysts said it would remain difficult to find a compromise between May, her allies and those in her party that wanted a sharper break from the EU.

"It will be really, really hard to work out a viable compromise and until that happens, GBP has further to fall," said Marshall Glitter, chief strategist at ACLS Global.

Sterling skidded to as low as $1.2937 versus the dollar in early Tuesday trading, its weakest since Oct 4, before recovering to trade up 0.2 per cent at $1.2987.

Against the euro, the pound rose 0.2 per cent to 88.29 pence, after earlier hitting a 2-1/2 week low of 88.570 pence on Monday.

"While a leadership challenge may no longer be imminent, it remains at an elevated risk, which is placing the pound under downward pressure in the near-term," MUFG analysts said in a note. "The Brexit mood music remains negative for the pound, which could fall more sharply if a leadership challenge materialises in the coming months."

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)