Sterling jumped as high as $1.3290 after Mrs May last night secured hard-fought concessions in a last-gasp effort to deliver a Brexit compromise acceptable to MPs ahead of the Commons showdown today. Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo, said: “The market was sensitive to positive news rather than negative news as it had already priced in very bad scenarios.” After paring some of its earlier gains, sterling was last trading half a percent higher on the day at $1.3214
Pound was still up 2.1 percent from a low of $1.2945 at one stage on Monday.
However, after Mr Cox released his latest assessment of the deal the pound dropped to $1.3032 at 11.30am. The Attorney General said the new deal failed to eradicate the risk of Britain being trapped with the European Union in a backstop.
The euro slipped to its lowest on the pound since May 2017 at 84.71 pence, before recovering the losses. It was last quoted down one-third of a percent at 85.19 pence.
Most other currencies stayed within familiar trading ranges before US February inflation figures due at 12.30pm (GMT).
Market sentiment received a modest boost after data on Monday showed US retail sales rose moderately in January, lifted by an increase in purchases of building materials and discretionary spending.
The dollar index, which measures the greenback against a basket of six rivals, was down 0.2 percent at 97.056 as some investors bought riskier assets.
However, the dollar tacked on 0.2 percent against the Japanese yen to 111.41 yen on the back of the improved appetite for risk.
Mrs May took negotiations to the wire in order to secure a Brexit compromise on the controversial Irish backstop from top eurocrat Jean-Claude Juncker.
The Tory leader made the late dash to the European Parliament’s Winston Churchill building in Strasbourg to continue work on plans rejected by her Cabinet over the weekend.
After a lengthy diplomatic battle, the Prime Minister delivered a “unilateral UK statement” that she believes will be able to help Attorney General Geoffrey Cox reverse his legal advice that claimed Britain could be permanently trapped in the customs union backstop.
Bart Wakabayashi, Tokyo branch manager at State Street Bank, said: “Seeing them together in the same screen is a positive – that there is some hand holding there and working together to move forward.
“If they can break the backstop down to a level where there can be some negotiation or at least compromise on both sides, there definitely does seem to be ight at the end of the tunnel.
The euro, which has struggled recently in line with a sputtering euro zone economy, found a measure of support on the improved sentiment.
The single currency was last up 0.1 percent at $1.1259, extending recent gains to a third session.