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Volatility around Brexit hits the GBP

The Brexit agreement of Prime Minister May suffered a major defeat in Parliament. He lost by 230 votes, which was the worst scenario of all.

Instead of falling, however, the pound rose after the decision and is well above 1.28. As Governor Carney of the Bank of England has pointed out, the rebound in the currency reflects expectations that Article 50 will be extended and diminishes the possibility of a Brexit without agreement. Nobody wants a messy Brexit without agreement and May’s next step will be to draw a Plan B before January 21st.

Debate of the motion of censure

The question now really is, what will be Plan B? Given the magnitude of the defeat, you can not adjust the same agreement a bit and present it. The March 29 deadline for Brexit will have to be delayed, there will be talks between all the parties to see if a new plan can be developed or if a second referendum should be called. The EU has been pushing to cancel the Brexit but also seems willing to make more offers. Either way, the pound has gone up because the most likely result is a smooth Brexit or that there is no Brexit at all.

Decline of the euro

The euro , on the other hand, has extended its decline for the fifth consecutive day after the prudent statements of the ECB. Mersch and Nowotny spoke of the slowdown in the eurozone and the ECB is likely to become economical next week. But the currencies that have offered the worst performance are the Australian and New Zealand dollars . The decline in spending by credit card placed the NZD / USD at less than 68 cents while the reading of consumer confidence in Australia has recorded minimums of more than three years, which led to AUD / USD up to the level support of the 100-day MMS. The dollarhas risen in general, and the USD / JPY is already knocking at the door of 109. The United States has not published data so the increase in bond yields and the slight fall in stock futures backed the movement.

Source: Kath Lien

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