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Sterling Tanks on Brexit Legal Advice

Investing.com

Investing.com - The British pound fell by more than a cent against the dollar as the U.K. government's top lawyer effectively killed off any chance that the U.K.'s agreement on leaving the EU would pass a vote in parliament later Tuesday, reviving the specter of a disorderly 'no-deal' Brexit.

Attorney-general Geoffrey Cox said last-minute tweaks to the withdrawal agreement hammered out over two years by the U.K. and EU did not eliminate the risk that the U.K. could be trapped as a rule-taker in a customs union with the EU indefinitely, despite assurances from Prime Minister Theresa May.

"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.

His comments make it more likely that Conservative lawmakers will again vote against the deal today, making it impossible for the government to overturn the 230-vote defeat it suffered the first time it held a 'meaningful vote' on it.

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GBP/USD was down 1.01% to 1.3015 by 07:32 AM ET (11:32 GMT), after rising as high as 1.3288 earlier in the day.

Samuel Tombs, the chief U.K. economist at Pantheon Macroeconomics said on Twitter that it was "pretty clear" markets think Cox's legal advice didn't give enough cover for euroskeptic lawmakers to change tack.

The House of Commons is due to vote on the divorce deal later in the day.

May said Monday that she had secured "legally binding changes" to her Brexit deal, which addressed concerns over the Irish backstop, an insurance policy designed to avoid a hard border in Ireland.

The euro also rallied against the pound following the advice, with EUR/GBP jumping 1.16% to 0.8646.

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