The pound rallied after an adviser to the European Union’s top court suggested that the U.K. should be allowed to reverse its notice to leave the bloc.
Sterling snapped three days of losses following the non-binding opinion from Advocate General Manuel Campos Sanchez-Bordona of the EU Court of Justice, who said “the possibility continues to exist” to revoke the Article 50 notice until the U.K.’s withdrawal agreement is formally concluded.
“The pound is really taking the Article 50 news well,” said Jordan Rochester, an analyst at Nomura International Plc. “Sterling had been trading on the soft side due to concerns about the vote and how Labour plan to table a vote of no confidence if or when it falls through. This doesn’t change that, but the market had gotten overly short.”
Sterling gained 0.7 per cent to US$1.2818 by 10:28 a.m. in London, and strengthened 0.3 per cent to 89.00 pence per euro. The yield on U.K. 10-year government bonds fell one basis point to 1.30 percent.
The ECJ opinion comes as the government faces a vote Tuesday on whether it’s in contempt of Parliament over its refusal to release legal advice on Prime Minister Theresa May’s divorce deal.
Lawmakers will then debate the Brexit plan for a week, before a vote on it that May looks set to lose. This would open up a range of potential outcomes, including a second referendum. If the court’s decision backs the view that Brexit can be reversed, it could help those campaigning for another Brexit vote.