Mario Blascak, PhD
Independent Analyst
- The UK government of Theresa May will try to get the Brexit deal approved in House of Commons after crushing defeat two weeks ago.
- The coalition junior DUP party is reportedly supporting the Plan B for Brexit.
- The set of amendments the members of the parliament can ask for is wide, but the scope for soft Brexit is expected to boost Sterling further.
Sterling is the top performer this year so far, as it 3.1% of which the greatest part happened last week, is backed by investors’ confidence of no-deal Brexit risk playing out.
The House of Commons is expected to vote on amendments to Brexit deal on Tuesday, January 29, with a wide range of options ranging from the proposal of Labor party to order the Prime Minister Theresa May to seek an extension to article 50 if she cannot win parliamentary approval for a Brexit deal by the end of February. Other proposals including the Conservative party amendments seeking removal of the controversial Northern Ireland backstop even with the EU standing clearly against such move.
The amendments proposed so far in the House of Commons are basically calling for extending Article 50 and preventing a no-deal Brexit outcome, or calling for the indicative votes to determine the next step in the Brexit process. Some other amendments also seek to solve the backstop issue or even call for a second referendum.
The amendments will be voted in the UK parliament after a debate. So it is in fact up to the Speaker of the parliament to decide which proposals will be debated.
For Sterling, the removal of the threat of “no deal” has already played well, as it rose to a 15-week high against the US Dollar last week and some more relief is expected to come with the parliamentary amendments increasing the chances of the deal being passed.
It is a sure shot that the UK business and consumers will welcome the news of a no-deal Brexit being out of the game and that is providing a further solid background for Sterling.
With a softer Brexit being the main scenario, the return back to 1.3500-1.4000 range could easily be a matter of few days for the currency traders.
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