On the night before Parliament decides on Theresa May’s Brexit plan, sterling is set for its biggest rise of the month. There is as yet no agreement between London and Brussels, though there are lots of headlines, some of them promising, on the face of it. And at least the ‘meaningful vote’ is still on. Junior Brexit Minister Stephen Barclay this evening announced that all parliamentary votes the Prime Minister has promised will be held. That’s just about all that is clear. The first ballot, planned for tomorrow, which is meant to give MPs a say on the revamped Brexit deal, had, by early evening on Monday no reworked deal to vote on.
Top EU officials and Downing Street have been clear that progress towards unlocking the hiatus on the Northern Ireland Backstop has been largely non-existent. There has been no discernible progress during talks between Attorney General Geoffrey Cox and EU counterparts. Advice from the government’s top lawyer will be published on Tuesday, before Parliament sits. Not that there should be a great deal of mystery about the contents. Michel Barnier's offer of a “new" unilateral exit plan as reported over the weekend was neither new, in the strictest sense, nor likely to be accepted as a failsafe escape by hard-line Brexit supporters. The formula essentially leaves the rest of the UK out of any fall-back plan for Northern Ireland, echoing previously rejected ideas.
As such, the clock continues to tick down; which explains the frantic attempts to foment a breakthrough into the night. The latest reports you may have heard - Theresa May is on her way to Strasbourg to extend discussions that begun in recent days with European Commission President Jean-Claude Juncker in person. The main thing missing from the typical maelstrom of headlines that peppers the news cycle around parliamentary Brexit votes? Substance on matters that could truly melt the ice. It’s one reason why the market in sterling hedges and vol. capture further beyond a month is not exactly on a tear. Participants are most exercised about sterling volatility into the 29th March Brexit deadline and a little beyond. But the drop off in expectations about how sharply the pound might swing afterwards affirms a wide expectation—echoed unofficially in Brussels and London—that Brexit will at worst be delayed. If so, objectively, probabilities of a market-friendly outcome increase.
How this affects our Brexit Top 10 markets:
GBP/USD: 140 pips to the good speaks for itself though, the headline-driven nature of sterling’s market raises strong risks of evaporation. In any case, last week’s $1.3234 open should be scrutinised. The pair was at 1.3155 just now.
GBP/JPY: Sterling had already topped against the yen on the current material (news) with the latest two-hourly high of 146.46 vs. 146.49 implying more fuel is needed for the fire. We look for support around the last market price before publication—146.35—just above a consolidation across the Asia-EU cut on 7th/8th March
EUR/USD: The euro was flailing less, though had already begun to explore the air above last week’s post-ECB lows. Hourly peaks of $1.1258 and then $1.1250 point to the limits of any ‘deal-talk’ fuelled inspiration already having past.
EUR/GBP: The purest Brexit pair respects well-established euro support around .8526 (27th February’s 2019 low) and .8529 (Monday). Only a break below can open up April 2018 sterling highs vs. the single currency on the 86p handle.
UK 100: As ever, any strength relates more to global market sentiment, though sterling’s late acceleration certainly trimmed of the day’s some blue-chip confidence. The market closed 50 points off its best at 7130.6, up 0.4%
Germany 30: The same applies in Germany where the benchmark added 0.8%. Positive sentiment on the country’s two giant banks, which are holding early-stage talks, may have helped.
Lloyds: Investors in the Brexit stock par excellence didn’t buy the ‘news’ as it stood into the cash close, leaving the bank up 0.2%.
Barclays: The more international British bank rose 1.4% with world indices, particularly the U.S.’s, where its turnover is fastest.
Barratt Development: A tell-tale 0.6% fall…that still leaves a return of 30% for the year already.
Tesco: Retailer No.1 also needs something more solid than last-minute hope to rally, hence a 0.4% fall instead.
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