Brexit Vote 3 Quick Analysis: Parliament took the pound down, but could lift it on Monday
|- For the third time, MPs rejected May's Brexit deal.
- Parliament has an opportunity to show the way forward on Monday.
- GBP/USD has room to recover, but the situation is complicated.
The UK House of Commons voted against the Brexit Withdrawal Agreement by a majority of 58: 344 against and 286 for the deal. While smaller than the previous 149 and 230 margins, the result is loud and clear.
UK PM Theresa May said that she regrets the result and said that "I fear we are reaching the limits of this process in this House", hinting of a general election, something supported by the opposition parties as well.
The Pound was under pressure ahead of the vote and reacted with a drop to a new low of 1.2977, above support at 1.2960, before balancing out.
But before the country goes to elections and Sterling stumbles further, Parliament may have a chance to show another way.
Indicative Votes 2
After what was dubbed as Meaningful Vote 3 or MV3 or 2.5, Parliament will have Indicative Votes 2 on Monday, April 1st, April Fool's Day. In Indicative Votes 1, all eight alternative Brexit proposals were rejected. The one suggesting a closer economic relationship came closest to begin approved. And the one offering a second referendum got the highest number of votes.
The second round of these non-binding votes could see MPs coalescing around one winning proposal, presumably a softer version of Brexit. If there is a clear majority, the government may have to respond. In this scenario, the pound could rise.
Other scenarios
Another pound-positive outcome would be a general election after the deadlock. An election will likely result in delaying Brexit for a long time until a new leadership emerges and opts for another direction. The same goes for a second referendum, which has lower chances.
However, the default option remains that the UK leaves the EU on April 12th, without a deal. The cliff-edge scenario is something nobody wants on both sides of the Channel. If this outcome becomes more real, the pound will fall.
European Council President Donald Tusk reacted instantly and called for an emergency EU Summit on April 10th, just two days before the cliff.
Conclusion
All in all, the third defeat for May was a small loss for the pound. It may eventually turn into a huge win for Sterling, but the default option must be removed first.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.