BREXIT LATEST: BRITISH POUND JUMPS AS UK PARLIAMENT VOTE TO BLOCK NO-DEAL
- GBPUSD has skyrocketed over 200 pips off multi-year lows as British MPs pass the latest Brexit vote aiming to prevent the UK’s no-deal departure
- The Pound Sterling may continue to claw back recent downside as no-deal Brexit risk fades following Parliament’s passage of the latest Brexit delay bill
- Check out what IG Client Sentiment data suggests about spot GBPUSD retail trader positioning
During Tuesday’s trading session, we highlighted how the Pound Sterling was set to climb amid UK Parliament passing critical Brexit votes as British MPs seek to prevent departing the EU without a deal on the October 31 Brexit deadline. The retracement higher in spot GBPUSD began after news broke out yesterday that Conservative PM Boris Johnson lost his majority following the defection of prior-Tory MP Phillip Lee. British Pound upward momentum continued following reports MPs passed legislation to control Parliament’s agenda and prevent PM Boris Johnson sending the House of Commons on recess.
GBPUSD PRICE CHART: 1-HOUR TIME FRAME (AUGUST 30, 2019 TO SEPTEMBER 04, 2019)
Turning to today, spot GBPUSD price action has continued its ascent and now trades over 200 pips higher since plunging below the 1.2000 handle earlier this week. Extended gains for the Pound Sterling comes amid reports that the most recent Brexit vote passed Parliament 327-299 which calls on the Conservative government to request from the EU another extension to Article 50 (i.e. delay Brexit again).
Check out our Brexit Timeline for details on how Brexit negotiations have impacted the UK, Pound Sterling and financial markets.
Yet, PM Boris Johnson has adamantly voiced his opposition to delaying Brexit again and promised to sever the UK from the EU on the October 31 deadline – regardless whether or not a Brexit Withdrawal Agreement deal can be successfully brokered. Also, in response to today’s Brexit vote passing Parliament, PM Boris Johnson has proposed calling for a general election on October 15.
Shortly after 9:30 PM local UK time, Prime Minister Johnson's proposal failed to pass with Members of Parliament voting 298 to 56 with an abstention from the Labour party. Due to the prior bill that was approved, PM Johnson is now required to return to the European Union and seek an extension beyond the October 31 deadline. The request for an extension must then be approved unanimously by all members of the European Council. EU officials have previously stated they will not budge on the Irish backstop issue which has been a sticking point for months. Thus, the pursuit of a Brexit extension may eventually result in the UK leaving without a deal despite UK MPs best efforts.
To that end, the “Brexit can-kicking” may help the Pound Sterling recover from recent multi-year lows as it pressed to intraday highs after PM Johnson's proposal was voted down. Still, the rise in spot GBPUSD may prove to be short-lived considering the ongoing Brexit impasse remains largely unresolved. As such, keeping close tabs on British Pound implied volatility in light of its inverse relationship to Sterling spot prices may prove beneficial as the latest Brexit developments unfold.
-- Written by Rich Dvorak, Junior Analyst for DailyFX.com
Connect with @RichDvorakFX on Twitter for real-time market insight
