HomeContributorsFundamental AnalysisPound May Re-Visit Referendum Era's Price Swing

Pound May Re-Visit Referendum Era’s Price Swing

Brexit optimism pushed cable over 1.1 percent in overnight trading. Today, the pound may face historic volatile session and the fact is that this volatility for the currency may continue for the next few days. This is because of the Brexit vote sequence set by the British prime minister, Theresa May. It is likely that she may face another humiliating defeat in the parliament today. The pound’s one-month volatility has jumped above 12 percent but it is still well below the historic high which the currency experienced back in November When Theresa May faced a tragic death for her deal.

Another Trick In May’ Book

Theresa May, the British Prime Minister secured a deal last night. She flew to Strasbourg, France, last night to finalize negotiations with European Commission President Jean-Claude Juncker. She is convinced that the new wording will convince the lawmakers in the U.K. parliament. The European Commission President Jean Claude Juncker has made it clear “it is this deal or Brexit may not happen at all.”

According to her, the “legally binding” changes meet the requirement of the parliament about the Irish backstop and she is confident that the MPs would support her deal. This is one of another trick by the prime minister. She has put the parliament members under more pressure. They only have a few hours to review the deal.

Whose Opinion Matters The Most

Will she survive? By looking at her track record, it becomes clear that she is doomed to fail. With every hour passing, we are likely to get new news on Brexit from the lawmakers. It is the opinion of the Attorney General Geoffrey Cox which matters the most today. If he thinks that the current deal isn’t going to lock the U.K. indefinitely in the Irish backstop, the chances are that the prime minister may be able to secure a last minute deal. However, one needs to be really optimistic to think of such an outcome.

Remain Side Still Control The power

This is because there is still enough headwind from the remain side who dislike this deal altogether and they are likely to vote down this deal in a hope to stop the divorce process altogether- a more sensible approach. Labour’s leader Jeremy Corbyn has already said that he is going to vote against the deal. The critical element from here is that how the DUP and Tory Euroskeptics will vote. Theresa May needs nearly 116 votes to flip in favor.

How Big The Move Could Be?

The question on everyone’s mind is how high or low the currency will go on the back of the historic vote in the UK’s parliament today? Well, the fact is that Sterling is the best performing currency year-to-date and it is highly likely that the pound may revisit the same trading range which it did during the referendum era- back in 2016.

The likelihood for today’s move is between 5 to 10 percent on the Brexit vote. The currency may slide as much as 4 percent if the lawmakers do not back the deal in the parliament today. The drop could be even steeper if the odds of no deal Brexit becomes more prominent, this could push the currency lower against the dollar by over 10 percent. On the flip side, if Thersa May’s luck’s shine today and the deal passes through the parliament, we could see the sterling rising by another 3 to 4 percent.

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