Possible Brexit breakthrough: what to watch

Sterling traders spy chance of a breakthrough

Sterling traders spy chance of a breakthrough

Sterling has tonight hit a five-day high against the dollar and was trading at $1.3250 a short while ago. The pound reached a 10-day high against the euro. Still, sterling remains as difficult to trade as it has been throughout the most intense phase of the Brexit process due to marked volatility within a paradoxically limited range. Yet, options hint at growing confidence in the outlook for—at worst—a type of Brexit, that’s not incendiary for Britain’s economy.  Premiums in overnight options are little changed over the last few days. One-week and one-month implied volatility is actually falling. The market is clearly anticipating the best chance yet that the parliamentary deadlock could break but if this optimism turns out to be misplaced, March lows, like $1.30 in GBP/USD are likely to beckon.

This comes after Theresa May pledged the ultimate political sacrifice in a last ditch bid to get her Brexit deal through. She says she’ll step down if parliament – though most particularly Conservative MPs – vote for her deal.

Meanwhile, MPs are sounding out options for next steps, in case the Prime Minister fails for a third time. With plenty of scope remaining for confusion, we help minimise that with some key points.

  1. The speaker has whittled down a list of 16 options initially submitted for potential votes by half. The graphic below shows the remaining 8 that MPs have voted on. Results are set to be announced around a couple of hours later.
  2. It’s worth noting that although selected, votes on some motions could still be skipped, should MPs choose to do so. Usually, the motivation for such a move would be if consensus for one course of action has already been clearly shown as the dominant one
  3. The government has indicated that it could bring the deal that parliament has rejected twice in recent weeks back to the house on Thursday or Friday. Downing Street has repeatedly stressed that it will only chance another vote if it believes success is likely. Tonight will decide. If it becomes clear that Theresa May’s deal is still likely to fail to win parliament’s backing, the indicative votes process could resume on Monday, according to Oliver Letwin, the Conservative MP who has been leading it
  4. For the current Brexit deal to win approval, at least 75 MPs must back it, including dozens of Conservative MPs identified as pro-Brexit rebels who voted against it in the past. High-profile Tories in this ilk, including Jacob Rees-Mogg and Boris Johnson, have indicated they might now switch. Yet, according to reports, only 11 out of 64 Conservatives including both remain and leave supporters, who voted against May’s deal last time, have switched. The latest press reports suggest 40 switchers across the house with an equal number undecided

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