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This article was originally published on ETFTrends.com.
The Invesco CurrencyShares British Pound Sterling Trust (FXB) continues to face downward pressure as legal risk remains for British Prime Minister Theresa May's most recent amendments to the proposed Brexit deal.
After reaching close to $130 per share three weeks ago, FXB is down about 2.3 percent since then, but still up 4.04 percent for the year. FXB seeks to reflect the price in USD of the British Pound Sterling to provide access for institutional and retail investors to the investment benefits of the currency.
On Monday, May obtained legally binding Brexit assurances from the European Union in order to persuade reticent British lawmakers who are threatening to vote against the Brexit deal once again. The revised deal comes as March 29, the proposed exit date, looms.
"Today we have secured legal changes," May said during a news conference. "Now is the time to come together to back this improved Brexit deal and to deliver on the instruction of the British people."
However, British Attorney General Geoffrey Cox published his opinion on the matter, saying that significant legal risks remain, which could dissuade British lawmakers from approving the revised deal. In particular, a continuous point of contention in getting a Brexit deal done is the Irish backstop–an arrangement to ensure that Brexit, whether a deal is struck or otherwise, would not result in a hard border between Northern Ireland and the Republic of Ireland.
"The legal risk remains unchanged that if through no such demonstrable failure of either party, but simply because of intractable differences, that situation does arise, the United Kingdom would have ... no internationally lawful means of exiting the Protocol's arrangements, save by agreement," Cox said in the statement.
Wild Ride Ahead for Sterling
British lawmakers are set to vote on the revised Brexit deal Tuesday night, which should be a rollercoaster ride for the sterling.
"The move in GBP overnight (Monday) reflects the fact that May's plan is back in the running," Jane Foley, head of foreign exchange strategy at Rabobank, told CNBC. "We could see EUR/GBP dipping to 0.84 initially and cable pushing to 1.34 if a deal was passed."
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Against the dollar, the currency is down 5 percent over a one-year period, but all could change if the latest Brexit deal obtains approval. However, it could be more doldrums ahead should a rejection take place.
"If it fails, we'll see GBP fall on the back of short-term positioning being taken off," said Jordan Rochester, a foreign exchange strategist at Nomura. "But the move would likely be capped to no more than 0.87 in EURGBP given Article 50 extension still leaves open the options of softer Brexit and people's votes in market pricing."
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