GBP Falls on Speaker Objection Pre 3rd Vote

GBP is the biggest loser of the day as UK parliament will vote once against on Tuesday or ...Wednesday on whether to approve May's Brexit deal. Sterling's losses ensued after speaker of the House of Commons, John Bercow, said on Monday the government could not put the deal to the Commons again if it is “the same in substance”. Will he force the govt to rethink the vote?

Bercow, who is a remainer, suggested that a revised legal opinion on the deal may not be enough. UK Conservatives continue in high stakes negotiations with the DUP aimed at securing their 10 votes in the hope they will set off a domino effect that gets a Brexit deal done. However it may take a fourth vote to get it across the finish line.

In the third vote it will be critical for May to make significant progress. The PM needs to flip 75 votes from the last iteration to pass it. The DUP and ERG may deliver on 50 or more of those and that might be enough to keep the market believing it's possible. If she loses by 10 votes or less, it would be enough to convince the market a deal is probable and that could put a large bid into cable.

At the same time, last week's volatility may have only been a taste of the scale of moves to come on every headline and vote this week. It's a razors edge that could end in victory for May or a crushing defeat and political disarray.

The more-important trade story is that a Trump-Xi summit could be delayed until June. The sides are hung up on enforcement. The US wants the ability to unilaterally impose tariffs if it determines that IP is being stolen while China does not want to sacrifice its sovereignty. The US side has pushed for Trump and Xi to smooth it out at the highest levels but the Chinese side doesn't want Xi to be put in a position where he's forced to walk away from a bad deal due to last-minute changes; something that would cause him to lose prestige at home.

USD watchers are also focusing on Wednesday's FOMC announcement/press conference and dot plot forecasts. The Fed stmt and Powell's press conference are anticipated to shed more light on when it's likely to stop the process of selling resereves in its $4 trillion balance sheet later this year.