Sterling likely to bounce

Swissquote Bank Research Team Swissquote Bank Ltd

After rejecting PM May’s Withdrawal Agreement and failing to agree on any alternative, UK MPs are again counting on May’s persuasive power to obtain another extension agreement. Yet the outcome might be very different from what May’s extension period considered, as both houses of Parliament ratified a legislation that provides lawmakers the chance to impose legally binding changes into May’s divorce date.

Indeed, as May’s government is willing to postpone the date by 30 June 2019, it is becoming clearer that UK Parliament is willing to impose a longer period, thus prompting another debate among MPs that is taking place today. The recent talks initiated between the Conservative and Labor party brought nothing but gridlocks since no resolutions included a scenario where the UK would remain within the EU customs union, a major requirement for Jeremy Corbyn’s Labor party while being the exact opposite of Tory’s Brexiteers.

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It is therefore very likely that the British pound gets a boost for the time being. Either scenario consisting of a short-term or a longer-term extension period would provide GBP bulls with good reasons to support the currency. However major risks remain since European leaders are again solicited for an emergency summit in Brussels on Wednesday and while a certain disinterest in Brexit emerges ahead of incoming EU election, the European Parliament is expecting to see a plan attached with the extension.

Currently trading at 1.3103, GBP/USD is heading along 1.3150 short-term.

Author

Swissquote Bank Research Team

Swissquote Bank Ltd

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