Jane Foley, senior FX strategist at Rabobank notes that GBP is holding on to most of the gains made during Friday’s trading session with a little more than a day to go before PM May is expected to suffer a historic defeat in parliament as a result of the vote on her EU Withdrawal bill.
“PM May is faced with a rising chorus of accusations that her leadership has become dysfunctional.”
“The outlook for UK politics looks messy at best. GBP, however, is drawing support on the assumption that May could have no other real option but to push back the start of Brexit from March 29. “
“While GBP could rally further if a delay to Brexit is announced later this week, the extent of any rally would depend on the length of the delay and then on how this period is then utilised by the government. The uncertainty about the later suggests that the months ahead are likely to be volatile, but if the UK government and parliament do demonstrate this week that a hard Brexit will not be stomached, EUR/GBP could return to the 0.87 region and cable may return to the 1.30 area.”
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