Pound slightly lower but remains resilient as market await May’s next move

Apr 2, 2019

Good Morning,

A second round of indicative votes by UK Parliament last night resulted in there being no clear majority again for any of the alternative Brexit options. Although the votes were not binding, they were intended to help create a pathway to break the Brexit impasse by giving an idea of how a majority could be found within Parliament.

With no majorities being found on either May’s deal (after three votes) or any of the alternative options (after a couple of votes), the UK is being pushed closer to a potential no-deal scenario on April 12th which is the current default position. Although the odds are still relatively low, some banks have been increasing their probabilities of a no-deal.

Sterling has lost some ground, as a result, but remains remarkably resilient considering all of the uncertainty and as the new deadline fast approaches. Market commentators are suggesting this is because investors are predicting a softer Brexit as the most likely outcome.

Today, Theresa May’s cabinet are thrashing out what their next move should be and it’s likely they’ll be considering a range of different options. One of the most likely options will be to try and put May’s deal forward for the fourth time before the 12th April. At this stage, this seems like their only real option before they’d need to request a long extension (with good justification for doing so. I.e. general election/referendum), thereby having to take part in European elections, or they opt for a no-deal.

The market will be watching closely for any announcements from the Cabinet and the rates will move accordingly.