Sterling poised as May Day is upon us
After being delayed last time around, the vote on Theresa May’s Brexit withdrawal agreement finally happens this evening (voting starting after 7pm).
The deal is widely expected to be rejected by Parliament, however, the course for Sterling is likely to be determined by how the votes come in and what the next steps will be. If May only loses by a small margin then she will be hoping she can get more concessions from the EU and then win on a second vote. A heavy defeat (say over 100 votes) would open up a lot of uncertainty over what happens next. It would be likely they will need to extend the Article 50 departure date, which, although prolongs the period of uncertainty, could also potentially increase the chances of a softer Brexit or no Brexit at all.
Certainly it seems there’s a growing amount of investors that believe the odds of a disruptive no-deal scenario are cooling, as the majority of Parliament appear too concerned about the upheaval it could cause. This has led to some banks (such as BNP Paribas) suggesting that it’s time to buy Sterling, with many feeling the negativity has already been heavily priced into the Pound and therefore there is upside potential.
Nothing is out of the question though and there could still be some last minute twists left in store. One thing for sure is that Sterling volatility indexes remain very high, with the market expecting some swings in the next 24-hrs.
The GBP/EUR currently trades around 6-week highs and the GBP/USD is close to a 2-mth high. Please let us know what you have coming up and whether you would like to place any overnight target levels.