As expected the UK’s parliament rejected Prime Minister Theresa May’s proposed Brexit deal this morning. Cable had come under pressure prior to the result, falling over two big figures on the day to trade under 1.2700 but has since recovered to near opening levels just shy of 1.2900 as May confirmed that she will look to reshape the deal with cross party contributions ahead of the March 29 deadline. Across the rest of global markets, investor sentiment rose with stock markets having a strong day, Fed officials giving US markets another step up by reiterating their recent dovish sentiment. The dollar had a whippy day mainly on the back of Brexit fluctuations in the pound and Euro, but has finished stronger with the Dxy trading near 96.00.
Brexit will enter and new phase now and the next few days and possibly months should see more volatility in UK markets with the pound in particular likely to experience big swings. There’s still much uncertainty on what will occur and this should continue to weigh on sentiment but essentially for sterling traders nothing has really changed, any signs of a hard no deal Brexit will push the pound lower and indications that a deal will get through should be supportive. First up, Theresa May has to survive a vote of no confidence tomorrow and then it’s back to the drawing board, what options she has could be limited with the EU continuing to state that it’s not prepared to renegotiate on the original deal although this stance could change with the possibility of a no deal Brexit also hitting a faltering EU economy fairly hard in some sectors . The possibilities at the moment seem myriad, with a general election, second referendum and an exit extension all being touted as potential outcomes of this result. The one certainty for the market and sterling traders at the moment is more uncertainty, and that means more volatility ahead for some already fatigued markets.
Looking ahead to todays trading and Asian markets are set to open positively after a good US session. Australian traders will be looking at the Consumer Sentiment numbers early in the day with the Aussie still trading resolutely around 0.7200. It’s quiet for the rest of the Asian session in terms of data releases and the London open will begin with the focus firmly back on the UK, BOE Governor Carney is set to testify in front of the Treasury Select Committee and this will be swiftly followed by the latest CPI and RPI data as well as the continued Brexit vote result fall out. The US session has no real data releases of consequence but earning reports continue to come thick and fast with some of the biggest US banks due to announce results tonight.