The pound has fallen sharply, giving up strong overnight gains, after attorney general Geoffrey Cox said the risk of the UK staying stuck in backstop arrangements remained despite fresh assurances from the European Union.
Sterling slumped 1% against the dollar to near the $1.30 mark, wiping out overnight gains sparked by prime minister Theresa May's securing 'legally binding' assurances from the EU.
May and European Commission president Jean Claude-Juncker last night unveiled three documents – a joint instrument, a joint statement and a unilateral declaration – aimed at addressing fears the UK could become stuck in backstop arrangements indefinitely.
But Cox said in his legal advice that while the new assurances reduced that risk, they did not eliminate it.
'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, at least while the fundamental circumstances remained the same, no internationally lawful means of exiting the Protocol’s arrangements, save by agreement,' his letter read.
MPs are due to vote on May’s reworked Brexit deal later today, though getting a parliamentary majority entails overturning the historic defeat her initial deal suffered in January, when it was rejected by 230 votes.
The pound's fall helped the FTSE 100 reverse course, swinging from losses to gains as the index's roster of companies with heavy overseas earnings received a boost. The UK blue-chip index was trading 12 points, or 0.2%, higher at 7,143.
Stocks with high exposure to the UK domestic economy, which had been basking in the hopes of May's deal securing parliamentary approval, gave away some of those gains, but remained at the top of the index.
The FTSE 250 also climbed, with shares in CYBG (CYBG), the UK bank which owns Virgin Money and Clydesdale and Yorkshire Banks, up 3% at 203p.
Capita (CPI) was another mid-cap name lifted by Brexit optimism, with shares in the outsourcing giant up 1.6% to 119.9p.
Domino’s (DOM) shares rose 5.2% to 244.9p despite mixed results. While UK like-for-like sales rose, international ‘growing pains’ ate into the pizza takeaway chain’s profits, which fell 22% to £61 million, from £79.6 million in the previous year. Net debt in 2018 was £203.3 million, up from £89.2 million in 2017.
‘Two things were notably absent from the results, adding to investor woes,’ said AJ Bell investment director Russ Mould. ‘There was no comment on current trading, which may lead some people to speculate life isn’t getting better for the business.
‘There was also no new share buyback despite the stock trading close to a four-year low. Companies often buy back shares if they think the stock is undervalued.’