Sterling steady as May plays on

Theresa May gets to play Brexit for at least another day

Sterling steady as May plays on

Theresa May gets to play Brexit for at least another day (two weeks in fact.)

  • The strategic nous of Labour’s Yvette Cooper is also becoming clearer
  • Cooper earlier backed a (stalking horse?) amendment aiming to hold the PM to a vote to delay Brexit
  • But that plan was pulled at the last minute, leaving Cooper’s new amendment that simply noted a vote promised for 14th March
  • In another surprise, it won government backing, passing 502/20

Other key developments

  • Amendment protecting EU citizens’ rights agreed without a vote
  • Labour’s Jeremy Corbyn got fully on board the Second Referendum train…though it’s going nowhere as it lacks a majority
  • 20 Conservatives voted against Cooper’s plan whilst 88 abstained (AKA a minority)

What happens?

As things stand, the most likely fate of the government’s Brexit plan is still a defeat by 12th March, paving the way for a delay request

Sterling outlook

The cost of options expiring after 29th March continues to slide. In other words, demand to insure against or capitalise on sharp post-Brexit volatility has stopped rising

Price chart: sterling/dollar implied volatility – hourly [28/02/2019 11:37:21]

Source: Refinitiv/City Index

  • In lieu of (likely) further twists and turns, it’s now a waiting game (including for sterling)
  • Technically, note the pound is elevated above its 21-day average, which itself points higher
  • But after a 4.5% surge from February lows, caution plays against that ebullient clip continuing
  • After GBP/USD topped $1.33 for the first time since September, dips below are probable
  • January’s $1.3216 high is a target

Price chart: sterling/U.S. dollar spot – daily [28/02/2019 12:01:49]

Source: Refinitiv/City Index

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