(Recasts after Brexit headlines, adds corporate broker, Forbes
By Patrick Graham
LONDON Feb 7 Sterling bounced back from its
weakest point in two weeks against the dollar on Tuesday as
investors jumped on signs of growing pressure on the government
to give parliament a greater say in the final deal to leave the
Dealers said the pound's gains back towards $1.25 from an
earlier low of $1.2347 were driven chiefly by junior Brexit
minister David Jones' statement that parliament would be given a
"meaningful" vote on the deal.
Jones later reiterated the harder line that there would be
no renegotiation of the terms the government brings back to
parliament. But the mixed messages were read as more evidence of
pressure on Prime Minister Theresa May to soften a stance that
prioritises control of immigration over membership of the bloc's
lucrative single market.
"The messages this afternoon are not totally clear," said
Alvin Tan, a strategist with Societe Generale in London. "What
we do know is that there has been a rebellion of some form from
government MPs. So I guess when this story came out people just
jumped on it.
"At least there is a sense that there is some pressure on
the government. The majority of MPs are in favour of maintaining
some ties to the EU ... so a more meaningful role for parliament
is seen as a positive thing."
The gains came after a rough few days for sterling, due
largely to a run of surveys suggesting that the economy and
consumer demand is finally softening in the face of
Bank of England policymaker Kristin Forbes added to support
for the pound by saying the bank should raise interest rates
soon if growth remains solid and inflation continues to
By 1700 GMT, sterling traded up 0.1 percent on the day at
$1.2480 and 0.7 percent stronger against a broadly weaker euro
at 85.65 pence.
Further batches of downbeat data - this time from the BRC
measure of retail sales and the first fall in UK house prices
since the vote to leave the European Union last June - may add
to jitters in the days ahead.
While Forbes was read as sounding a harder line on rates
than the BoE last week, the data has highlighted concerns over
how consumers will bear up in the face of price rises caused by
an almost 20 percent fall in sterling.
The British Retail Consortium numbers showed consumers
reined in their spending last month in comparison to a year
earlier. Data from mortgage lender Halifax Bank of Scotland
showed British house prices fell 0.9 percent in January alone
after a 1.6 percent surge in December, compared to expectations
prices would hold flat on the month.
"Retailers normally hedge a full season out. So you will
really start to see the effect of the pound weakening in March
and April on sourcing inflation," said Mark Horgan, chief
executive of corporate and consumer foreign exchange firm
Moneycorp in London.
"The question is how much (of the price rises) firms will
push through to their customers. Clearly petrol stations for
example have already pushed through quite a lot but there is
obviously more to come."
(Writing by Patrick Graham; Editing by Nigel Stephenson)