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Jan 21 (Reuters) - Sterling firmed up to the day’s highs on Monday after British Prime Minister Theresa May promised to be more open with parliament in negotiating the country’s future relationship with the European Union.
She did not offer a clear roadmap on how she would address concerns over a commitment to ensure there is no return to a hard border between the British province of Northern Ireland and the Republic of Ireland.
She also refused to rule out leaving the EU without a deal, but the pound edged higher on hopes that May might be pressured into a compromise on her stance.
“Her failure to detail Plan B could be the catalyst to the Parliament to taking control of the process,” said John Marley, a senior currency consultant at FX risk management specialist, SmartCurrencyBusiness.
“Ultimately that makes an extension, a deal or even a second referendum more likely,” he said.
The pound, which initially dipped after Prime Minister May made her opening comments, rebounded and hit the day’s highs at $1.29. It had been trading around $1.2860 before she spoke. Against the euro too, the currency rose 0.2 percent to a session high of 88.07 pence
It had been at 88.340 pence earlier though analysts said the currency moves were also exaggerated because U.S. markets were shut for a holiday.
Jane Foley, a senior currency strategist at Rabobank in London, said speculation would continue that May would be pushed into a compromise over the Brexit negotiations.
The firmer pound pushed the FTSE 100 index 0.1 percent lower, while 10-year gilt yields edged two basis points lower to 1.33 percent.
With around two months to go until Britain is due to leave on March 29, investors advised caution around current levels as there is still no clarity on the terms on which it will leave the world’s biggest trading bloc, with the pound trading roughly in the middle of its trading range over the last two years.
Last week, May’s deal suffered a massive defeat in parliament but she then won a subsequent vote of confidence by a narrow margin with the backing of the small Northern Irish party that props up her minority government.
May’s focus on changing the Northern Irish backstop, an insurance policy to ensure there is no hard border between the province and Ireland, met stiff resistance from lawmakers including party officials who support her in government.
A lawmaker from the DUP said the border “backstop” remained the fundamental problem with her Brexit divorce deal that she must focus on changing. (Reporting by Sujata Rao, Andy Bruce and Josephine Mason; Writing by Saikat Chatterjee; Editing by Hugh Lawson)