Sterling falls to low as Brexit jitters rise

LONDON (Reuters) – The pound fell toward a two-week low on Thursday amid growing concerns about the UK parliament's vote on Brexit and after the Bank of England warned of risks to the currency if Britain leaves the European Union in a disorderly manner.

Barely four months before Britain is due to leave the EU, Prime Minister Theresa May is struggling to garner support from parliament for the agreement she sealed with EU leaders. Parliament is due to vote on the deal on December 11.

The possibility of a no-deal Brexit sent the pound to a two-week low earlier this week before it retraced some losses and currency analysts say a recovery is unlikely before the parliamentary vote, which will be a key risk event.

“It looks on paper like (parliament) is going to vote against the deal, which will lead us into heightened uncertainty,” said Lee Hardman, an FX strategist at MUFG in London.

Hardman said a resounding defeat for May's plan in parliament would increase fears that Britain may struggle to pass future Brexit legislation and that the pound could fall by as much as 4%.

Adding to the gloomy sentiment, the Bank of England warned on Wednesday that Britain risks a bigger hit to its economy than in the financial crisis if it crashes out of the EU without a deal. It said the pound could then lose a quarter of its value.

The pound was trading down 0.5% against the dollar at $1.2760 per dollar. It was down 0.5% against the euro at 89.14 pence.

May stepped up her warnings about the risk of a disorderly Brexit on Thursday if parliament rejects her deal.

“The timetable is such that actually some people would need to take some practical steps in relation to no deal if the parliament were to vote down the deal on the 11th of December,” May told a parliamentary committee.

Meanwhile, Scotland's political parties will unite in their opposition to May's Brexit deal next week, joining together to show their anger at her plan to leave the European Union.

The initiative underlines the ire felt in Scotland, which voted to remain in the EU at a 2016 referendum, over May's plan, which several parties say was negotiated without any attempt to bring them on board.

They will propose a single motion opposing May's EU Withdrawal Agreement in a debate at the devolved Scottish parliament Holyrood, which has wide-reaching powers over education, health and a portion of taxes.