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Pound trades to the tune of Brexit headlines

Unsurprisingly the pound has experienced high levels of volatility as it trades to dramatic end game Brexit headlines. 

Overnight highs of $1.3288 on Brexit deal optimism were quickly given back as the UK’s top lawyer rained on Theresa May’s parade, saying that Britain was still at risk of remaining trapped indefinitely in a customs union. 

Without the legally binding assurances that Parliament had requested fears of another humiliating defeat in the Commons sent the pound tumbling to $1.3007.
Still, Sterling has managed to pare some of this morning’s losses despite the DUP confirming that they will not be supporting the PM’s deal. Other, ministers, have softened their tone lending support to GBP.

What’s Next?

Meaningful vote 19:30 approx.

Should Theresa May’s revised version of the Brexit deal be sufficient to win over the 100 votes she needed, and the House of Commons votes her deal through, we expect the pound to rally sharply pushing through resistance at $1.33, before making an attempt on $1.3380. The move higher stemming from the fact that there will at last be a level of certainty surrounding Brexit, rather than the fact the UK is leaving the EU.

A defeat will mean that Parliament will vote tomorrow on no deal Brexit. The UK being a step closer towards a no deal Brexit will send a shiver down the spine of the pound. We would expect to see an extension of this morning’s selloff. In this case we anticipate a rapid break below support at $1.30 prior to testing $1.2960. A break through these levels could see the pound drop sharply towards $1.2895

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