Summary:
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UK MPs expected to vote for a 3rd time on May’s deal
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Vote likely on Tuesday evening but could be pulled
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GBP begins the week on the back foot
Despite a raft of economic events from the UK in the coming days, by far and away the biggest driver for the pound will remain Brexit developments, with parliament expected to hold a 3rd “meaningful” vote on PM May’s deal tomorrow evening. The time has yet to be confirmed, but will likely be around 7PM GMT, and there is still some speculation that the PM will back down at the last minute in an attempt to prevent another humiliating defeat. The chances of the vote taking place hinge on the support, or lack thereof, from the DUP with reports suggesting that unless they are on-side then its is unlikely to go ahead.
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This “simplified” decision tree lays out the possible paths ahead for Brexit. Source: Citi Research
While the DUP only have 10 MPs, the fact that they prop up the Tory party in the coalition as well as represent the area that will be most impacted by any Irish border issues gives them a heightened sense of importance. Furthermore, while the margin of defeat in last week’s meaningful vote was 149 - meaning 75 MPs need to flip for it to pass - there is a feeling that several Conservatives are hiding behind the DUP. The logic being that those skeptical of a deal don’t believe it is possible to pass without DUP support and therefore, knowing the DUP would vote against it last time, they had an excuse to follow suit.
The Prime Minister's official spokesman said that if the deal was passed by the Commons she would go to the EU summit (20-21st March) in Brussels on Thursday to ask for a short "technical" extension to the Article 50 withdrawal process. If there is no Commons vote for the deal, the spokesman said she would ask for a longer delay which would mean Britain holding elections to the European Parliament. The spokesman said that if a vote was to be held before Mrs May goes to Brussels, the Government will have to table a motion by the end of business on Tuesday at the latest.
GBPUSD hit a 9-month high last week at 1.3380 but price failed to make a clean break up through a potentially significant resistance zone from there up to 1.3500. Support on the downside may be found around 1.2960-1.3000. Source: xStation
