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GBP/USD and EUR/GBP in Focus After Second Reading Brexit Vote Passes, Timetable Vote Fails

GBP/USD and EUR/GBP in Focus After Second Reading Brexit Vote Passes, Timetable Vote Fails

Peter Hanks, Strategist

British Pound Forecast:

  • The British Pound swung wildly following a series of votes that are critical in the Brexit proceedings
  • Following the votes, the UK is left in a familiarly uncertain position with time winding down
  • View our Brexit Timeline for the full chain of events leading to today’s votes

GBP/USD and EUR/GBP in Focus After Second Reading Brexit Vote Passes, Timetable Vote Fails

British Pound volatility surged amid a series of Brexit votes on Tuesday. In the first of two votes, Prime Minister Boris Johnson received preliminary approval for his Brexit deal from members of parliament – passing 329 to 299. The motion’s success saw GBP/USD ticker modestly higher, but price action was tempered as market participants awaited the second and more-important vote, a fast-tracked Brexit timetable.

The second vote, referred to as the program motion, saw the Pound swing wildly as anticipation ahead of the results boiled over. The program motion vote did not pass, however, with 308 ayes to 322 noes. Consequently, GBPUSD plummeted before reclaiming some ground to trade around 1.2924.

GBPUSD Price Chart: 1 – Minute Time Frame (October 22) (Chart 1)

GBPUSD Price Chart Brexit Vote

Meanwhile, EURGBP surged to nearly 0.8640 before falling to rest around the 0.8619 mark. Evidently, the failed vote and the Pound’s reaction suggests market participants perceive heightened odds of a no-deal Brexit.

EURGBP Price Chart: 1 – Minute Time Frame (October 22) (Chart 2)

EURGBP Price Chart Brexit Vote

In response to the failed vote, Prime Minister Boris Johnson said the next steps are “to intensify preparations for a no-deal Brexit” and “pause legislation until the EU has made up its mind about a delay.” Given the dwindling timeframe ahead of the October 31 deadline, the Prime Minister’s suggestion of a pause in legislation does raise some questions. It could be argued such a pause would result in the UK being left without an alternative when the deadline arrives, essentially forcing a no-deal Brexit to occur.

Across the English Channel, the European Commission said President Donald Tusk is consulting EU leaders on extending the Brexit deadline to January 31, 2020 after the UK government lost the fast-track vote in Tuesday’s parliamentary session. Now, discussions between EU and UK officials will have to take place in addition to President Tusk’s EU-wide consultation. While the Brexit outcome seems entirely uncertain at this time, one theme is likely to persist - sustained volatility for the British Pound and its various crosses.

--Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

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