Reschedule of Brexit vote lifts Sterling slightly due to hopes of 'better deal'

The pound edged off 20-month lows on Monday as British Prime Minister Theresa May rescheduled a delayed vote in parliament on her Brexit plan for mid-January.

Sterling, trading at $1.26, inched higher as May confirmed the vote - postponed last week in the face of deep opposition - would happen in the week starting on Jan. 14.

With May facing deadlock in parliament over her deal to leave the European Union and the bloc offering few concessions so far, calls for a second Brexit referendum are growing louder.

Nonetheless, sterling has stayed within a narrow trading range. It was up 0.2 per cent against the dollar at $1.2609 on Monday, not far off a 20-month low of $1.2477 touched last Wednesday, a day after the planned vote in parliament was postponed.

Against the euro, the pound fell 0.2 per cent to 90.02 pence. It is not clear what impact if any, a second vote would have on sterling. Some analysts suggest the currency could jump because it could reduce the risk of a no-deal Brexit, which could complicate trade and business, but others say it would only deepen the economic and political uncertainty.

Traders appear to be shying away from taking big bets on the British currency with so much doubt about the chances of securing a deal with the EU less than four months before Britain is due to leave the bloc, on March 29.

"The short-term risk premium is still not particularly high suggesting more downside risks for the currency as the March deadline approaches," said Chris Turner, head of foreign exchange strategy at ING.

The pound has fallen for five consecutive weeks against the dollar.

Traders say the 20-month low of below $1.25 hit on Wednesday would act as a temporary support for the battered currency unless there was further clarity on the outcome.

Despite the tough task that May faces in winning concessions from the EU over the Brexit deal agreed on Nov. 25, most investors think the British parliament will eventually back a "softer Brexit" rather than a complete separation from the EU.