We don’t see how GBP can maintain its strength. Too much uncertainty: GBP/USD is currently trading at 1.3112, approaching 1.3065 short-term. UK Prime Minister Theresa May says she’ll return to Brussels to convince the European Council to remove the Northern Ireland backstop. Yeah, right.
Parliament agreed with her not to rule out leaving the EU without a formal deal. Ironically, the agreement contains no clear guidelines as how to avoid a hard Brexit. At the same time, it limits May’s rhetoric that the House of Commons is causing a no-deal Brexit by not supporting its Withdrawal Agreement. Still, a few minutes after the Commons’ votes, European Council President Donald Tusk repeated that concessions on the existing divorce are impossible. This risk of no deal does not seem to stop GBP traders buying long positions.
The key question remains: why would UK MPs require May to go back to Brussels if the odds are clear? As the Council won’t accept any amendments, it will probably accept a conditional extension of the March deadline constrained by a second referendum or general elections, or it will force certain UK MPs to vote for remaining within the EU customs union. Time is running short to the mid-February deadline.
By Vincent Mivelaz
