What happened:

Three days and three votes down the road, the UK Parliament has managed to convince markets of nothing but its eagerness for inactivity: in the first two days, where action was to be assumed, the Parliament voted against, while on the third day it agreed to push the decision further down the road, if the EU allows it.

While businesses have taken this in a mildly positive way, this is a big IF. To begin with, another vote will take place before Wednesday, March 20, where Theresa May hopes to persuade at least her own party to approve of her existing deal with the EU. This will mark the third time May tries to obtain a meaningful vote on her Brexit deal, after losing with a 149-vote difference last Tuesday.

What’s next:

May needs the vote as she will be travelling to Brussels for the EU Council Summit, possibly for the last time before Brexit. It is there where she will request the extension of Article 50 from other EU leaders. The only issue is that May is likely to be viewed as a student trying to find excuses for not handing in her assignment in due time if good reason(s) for the delay is not offered. Furthermore, even if good reason(s) is offered, the EU leaders reserve the ability to reject the delay proposal, regardless of length of the proposed extension; all it takes is one country to reject the proposal and the UK will not be granted its delay.

The Brexit saga does not appear to have become any clearer, even though markets have been reacting on what they perceive to be best for countries’ prospects. Theresa May’s last minute strategy may work if the UK Parliament ends up between a choice for a no-deal Brexit or the acceptance of the PM’s deal, but finding themselves between the proverbial rock and hard place can only take place if the EU rejects the delay on March 21-22.

The possibilities:

May’s strategy could backfire in the case where the EU accepts the delay, as it will give the opposition enough time to pursue a no-confidence vote, as May’s leadership will likely appear less attractive if it is perceived that she has wasted two years and failed to reach an agreement. Still, May would continue to head the UK if the next no-confidence vote has the same result as the first.

Unfortunately, the possibilities for action remain as many as before, given that the Parliamentary decisions have not really enlightened the markets. At this time, even the possibility for the cancellation of Brexit from the UK side cannot be ruled out, even though MPs rejected calls for a second referendum.

Unless political decisions finally offer clear guidance as to where the UK is headed and stop issuing both positive and negative signals with regards to the country’s economic prospects, the Pound is due for a volatile second half of the month.

Brexit

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Feed news

Latest Forex Analysis

Editors’ Picks

EUR/USD trims Pound-related gains, back to 1.1150/60 price zone

The EUR/USD pair got a nice short-lived boost from Brexit optimism, although it quickly trimmed gains, as PM May failed to convince the markets. Failure near 1.1200 left doors opened for a retest of the yearly low at 1.1110.

EUR/USD News

GBP/USD nears 1.2700 as Brexit optimism fades

The GBP/USD pair keeps easing from daily highs and approaches the 1.2700 figure, down from 1.2814 as UK opposition wasn't convinced by PM May 'new' Brexit deal proposal.

GBP/USD News

USD/JPY extends gains above 110.50, to highest in two weeks despite US Dollar weakness

The USD/JPY broke above 110.25 earlier today and accelerated to the upside. During the American session printed a fresh daily high at 110.63, the strongest in two weeks. 

USD/JPY News

Anti-EU populism rise not priced in the EUR, European election could hit Euro

The European Union is holding its Parliamentary election next Sunday, May 26th and the impact of this political event seems to be underpriced by currency markets. 

Read more

Gold struggles pull away from May lows, continues to trade near $1270

The XAU/USD pair closed the first day of the week virtually flat below the $1280 mark and came under a renewed pressure on Tuesday as the upbeat market sentiment didn't allow the precious metal to find demand as a safe-haven

Gold News

Majors

Cryptocurrencies

Signatures