Brexit update: Sterling signals say ‘Any certainty will do’

Parliament looks set to wrest control of Brexit from the government, but the pound is not exactly euphoric

Brexit update: Sterling signals say ‘Any certainty will do’

Parliament is preparing to vote on a key amendment that aims to finally wrest control of the Brexit shambles from the government. There are strong indications of parliamentary support. Yet there is no highly charged sterling revival due to political ambivalence at almost every turn.

To begin with, the Prime Minister’s first parliamentary response to the European Commission’s Article 50 extension sticks with the same boilerplate as all of her substantive statements this year:

  1. Changing the Withdrawal Agreement (WA) is not an option
  2. The Prime Minister continues to try to build support for her Brexit deal
  3. Britain’s default option remains a no-deal Brexit

It has also emerged that the government has set aside Wednesday for debate on secondary legislation that’s required to formally change Britain’s EU departure date. The debate ought to be a formality, though it would be unwise to assume it will pass without incident. And the main takeaway is unconnected to that discussion: if parliament is to debate changing the WA on Wednesday, the government is highly unlikely to hold ‘Meaningful Vote 3’ (MV3) on that day too.

Despite the tightness of time, the MV3 date remains a mystery. Downing Street’s tardiness about confirming that vote (despite reiterating on Monday that it intends to) helped stoke speculation that the deal was dead (again). Theresa May herself conceded that parliament still did not support her formula.

The focus is thereby tightening on Monday night’s votes, particularly on an amendment tabled by Conservative MP Oliver Letwin.

Amendments Parliament can vote on this evening

  1. Amendment A (tabled by Conservative MP Oliver Letwin): Seeks to take control of parliamentary time to hold indicative votes on Brexit options
  2. Amendment D (Labour): Government to give parliament time to find a majority for a different approach on Brexit
  3. Amendment F: Calls on the government to seek parliament's approval on leaving without a deal if Britain comes with a week of doing so

Unlike the two other amendments selected for debate by The Speaker, Letwin’s vote has proven cross-party backing, with 120 MPs having signed the motion. If passed, the vote could be a turning point, because it would enable Parliament to row back the government’s do-or-die approach.

Perhaps earlier in the Brexit saga, the increased probability of this motion passing would have been lauded by sterling buyers. Yet given dense visibility about what happens if the motion is carried, the pound is mostly drifting.  In fact, the pound has latterly appeared somewhat in sympathy with MPs having another crack at Theresa May’s deal, even though sterling was clearly averse to it just weeks ago. Given that it at least offers a higher level of certainty through closure, sterling shed much of Monday’s gains as Downing Street edged away from a clear timeline for MV3. Monday’s voting is scheduled to begin at 10pm.

How this affects our Brexit Top markets:

GBP/USD: Cable was last trading 10 pips below the $1.32 handle, having peaked at a 3-day high of $1.3245. Yet having tagged $1.30 ($1.30042) last Thursday to echo $1.30292 from 12th March, the support has been the base for an exploratory uptrend that looks intact. Zooming out a little, it would still be overstating things to say cable has been action packed since losing two big figures from the year’s almost-$1.34 highs around mid-March. The month’s range remains roughly $1.34-$1.30.

GBP/JPY: Against the yen, the pound’s rising line connects a low of 137.43 on 10th January to Monday’s 144.62 floor.

EUR/USD: A better-than-expected IFO business sentiment print accounts for Monday’s lift to £1.1332 high. Yet the single currency remains in limbo versus the greenback. This is largely to do with a soggy economic outlook more than Brexit, directly. Deteriorating growth threatened to push the rate through intermediate supports on Friday after it touched $1.1271, its lowest since 12th March.

EUR/GBP: Recycled euro strength may also be giving the single currency the upper hand against sterling on Monday, whilst the pound softens further. There was a possible double bottom in the pair at 0.8530 on Friday, 1 pip below the low on 19th March. In any case, whilst the broad falling wedge that became clear in January has unmistakably broken to the upside, the euro will need to retake Friday’s March high of 87.23p to confirm a trend change in its favour. The euro was last up around 20 pips at 85.74p.

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