(14JANUARY 2019)DAILY MARKET BRIEF 2:The pound poised to drop

(14JANUARY 2019)DAILY MARKET BRIEF 2:The pound poised to drop

14 January 2019, 13:46
Jiming Huang
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As a vote on the EU Withdrawal Agreement nears, Prime Minister May’s proposal looks likely to lose. Despite her efforts to wring concessions from Brussels, Members of Parliament are overwhelmingly against her Brexit option. A vote against her tomorrow will slap the pound, which recently made gains against the dollar (week-to-date: +0.95%) to 1.28 USD/GBP. We expect a sharp drop in GBP following a losing vote. What happens thereafter depends on what the EU or the UK do. For now, the divorce date of 29 March 2019 remains in place. There are rumblings that this deadline might be extended: chances are that MPs will allow an extension of Article 50, which allows Brexit in the EU Constitution, which would postpone the deadline to end-November 2020! This could allow a new referendum or a newly negotiated trade agreement, perhaps one like Norway’s. For now, it is difficult to estimate the direction of the British pound.

By Vincent Mivelaz

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