Chart of EUR/GBP (euro vs British pound) – Source: TheTechnicals.com and TradingView

On Tuesday, the British pound rallied to its highest level against the euro since May 2017. It also rose to its highest level against the U.S. dollar since September 2018.

UK PM Theresa May Open to Delayed Brexit

This sterling breakout was prompted by a statement from embattled UK Prime Minister Theresa May to British Members of Parliament promising the possibility of a delayed Brexit. May’s new plan to buy time amid the massive political chaos surrounding the UK’s proposed departure from the European Union gave the pound a solid boost.

Widely considered a concession, the PM’s plan provides Parliament with the option of ruling out a “no-deal” (or “hard”) Brexit. This could delay the scheduled EU-departure (currently slated for March 29, Brexit Day). Going a step further, the opposing Labour Party said earlier that it is willing to back yet another public Brexit referendum on whether to remain in the EU. This development was also positive for the pound.

British Pound Jumps on May’s Concession

As noted, the British pound surged sharply on hopes for a Brexit delay and the prospect of avoiding a potentially disastrous hard Brexit.

EUR/GBP dropped to a low of 0.8562 on Tuesday to establish a new 21-month low. In the process, the exchange rate also broke down below a key support level around 0.8620. Since the pound is the second currency in the EUR/GBP currency pair, any move down for EUR/GBP is equivalent to a move up for the British pound versus the euro.

As Theresa May’s new parliamentary votes and Brexit Day approach, sterling-based currency pairs are likely to see even more Brexit-driven volatility within the next few weeks.