Sterling held steady on Tuesday morning in London, but activity in the options market suggests some traders are expecting a turbulent ride during parliamentary proceedings this evening.

The UK’s currency was little changed against the US dollar at $1.3159, and down 0.16 per cent against the common currency, buying 1.1496 euros.

The pound has risen from $1.2484 recorded in mid-December, with investors increasingly convinced that a damaging no-deal Brexit is unlikely.

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Implied overnight volatility in the pound against the US dollar jumped from 8.05 points on Monday to 20.85 points on Tuesday, according to Refinitiv data that tracks activity in the options market. It was the highest level since the run-up to the Commons vote on Theresa May’s initial Brexit plan, which took place in mid-January.

Traders will be focused on the slew of amendments that are expected to be debated and voted on in the House of Commons on Tuesday evening, according to Chris Turner, head of foreign exchange strategy at ING.

One in particular, the Yvette Cooper amendment, is expected to garner significant attention, adds Lee Hardman, MUFG currencies strategist. This amendment would force the government to extend Article 50 to the end of this year if the government is unable to pass a Brexit agreement in parliament by February 26th.

“If passed, the pound could strengthen further lifting cable towards the $1.3300-level. In contrast, there would be disappointment if the amendment fails which could result in cable falling back towards the 200-day moving average at $1.3050,” said Mr Hardman.

In fixed income, yield on the benchmark 10-year UK Gilt was little changed at 1.276 per cent. – Copyright The Financial Times Limited 2019