Pound stronger as no-deal voted down

Mar 14, 2019

The Pound is higher today after UK Parliament rejected a no-deal Brexit last night.

The original vote was to rule out taking no-deal off the table for the 29th March but an amendment on the vote meant MPs took no deal off the table under any circumstance which went against May’s wishes. Although it’s not legally binding, and the default position is still no-deal on 29th March, it certainly means that they will vote tonight to either get a shorter extension with May’s deal potentially being agreed or a longer extension (which could mean second referendum or less likely a general election).

Theresa May announced that a third meaningful vote would likely happen on the 20th March – a day ahead of the EU Summit – and she’ll be hoping it will be third time lucky.

There have been some significant developments since last night’s vote which have supported Sterling. According to reports, the EU are considering a long extension to Brexit as they feel a short extension would be useless with UK Parliament so divided. A long delay opens the door to there being no Brexit at all.

The fear of there being potentially no Brexit at all has led to some (unconfirmed) reports that the DUP might be willing to support May’s deal after all. If May can win over the DUP then she stands a good chance of gaining a tight majority on her deal. According to many banks, the most likely scenario is a Brexit deal being agreed that is close to the existing one. For example, Goldman Sachs think there’s a 60% chance that May will get her Brexit deal ratified but they also still feel that a second referendum has a considerable chance of happening at 35%.

Tonight Parliament is voting on whether to extend Article 50. We’ll let you know if this causes any major shifts in the Pound.