The U.K. pound traded near a two-month high Monday as Prime Minister Theresa May made her final plea to lawmakers to support her proposed plan to leave the European Union despite near certainty that it will be voted down in parliament later this week.
May's plan, which had originally been tabled for a vote in early December, was delayed in the face of cross-party objections over the nature of the so-called Irish backstop, a clause in the withdrawl agreement with Brussels that would kick-in if the two sides failed to reach an longer-term arrangement on trade after Britain formally leaves the EU on March 29.
"There are some in Westminster who would wish to delay or even stop Brexit and who will use every device available to them to do so," May said in a prepared speech at a factory in the industrial heartland city of Stoke-on-Trent. "People's faith in the democratic process and their politicians would suffer catastrophic harm. We all have a duty to implement the result of the referendum."
"While no-deal remains a serious risk, having observed the events at Westminster over the last seven days, it's now my judgment that the more likely outcome is a paralysis in parliament that risks there being no Brexit," May added.
The pound was marked 0.42% higher against a weakened U.S. dollar Monday and pegged at 1.2873, the highest since November 22, as investors bet the parliamentary impasse could potentially trigger a softer exit from the EU that would maintain Britain's access to the single market.
"The key focus of the week is the meaningful vote on the Brexit deal tomorrow (likely to be voted down by the Parliament)," said ING's Petr Krpata. "Although sterling started moving last week on rumours of Article 50 being extended, we note that events this week may tame such expectations somewhat."
May's deal was dealt yet another blow by European Commission President Jean-Claude Juncker, who insisted in a letter to U.K. lawmakers that its terms couldn't be changed, and that while neither side wished the "backstop" to remain in place, he could not guarantee that it wouldn't.
"If the backstop were nevertheless to be triggered, it would only apply temporarily, unless and until it is superseded by a subsequent agreement that ensures that a hard border is avoided," the letter stated.
Should May and her EU counterparts fail to reach a deal on future trade, Britain would face the choice of either remaining in the European customs union, preventing it from signing free-trade deals with the United States and others, or existing the EU customs union and establishing a so-called "hard border" between Northern Ireland and the Republic of Ireland, a move that would contravene the 1998 Good Friday peace agreement.
Should -- as expected -- May's withdrawl agreement is voted down in parliament later Tuesday, myriad options will be be available in terms of the government's next steps, including tabling a similar deal with more forceful legal language.
Opposition leader Jeremy Corbyn, who heads the U.K.'s Labour Party, has said he will call for a vote of no-confidence in the government if the deal is defeated, a move that trigger fresh national elections, but indicated over the weekend that he would prefer a new deal with Brussels over a second referendum on Britain's EU membership.
"My own view is that I would rather get a negotiated deal now if we can to stop the danger of a no-deal exit from the EU on 29 March which would be catastrophic for industry, catastrophic for trade," he told the BBC's Andrew Marr program Sunday.