Top Story

Pound pares losses after May's historic defeat

As was widely predicted, Theresa May’s Brexit deal was crushed in the Parliamentary vote. The House of Commons overwhelmingly rejected Theresa May’s Brexit deal, which briefly sent the pound to the low of the day at $1.2672.

The results show a humiliating defeat for Theresa May, with 432 voting against the deal and just 202 voting in favour. This was a historic loss, which encouraged the leader of the opposition party, Jeremy Corbyn, to table a vote of no confidence in Theresa May tomorrow.

Market reaction

Following a knee jerk sell off, buying interest in the pound picked up, boosting sterling over 1.5% versus the dollar through $1.2885.

Against the euro the pound putting a spectacular performance, EURGBP dived from a day’s high of 0.8986 to just prior to the vote to 0.8853 shortly after, a surge of over 1.4%

A similar reaction was seen in GBPJPY, with a low of 137.39 being struck before the ensuing rally saw the pound peak at 140.03.

Traders take the optimistic view

The fact that the pound pared losses quickly and rebounded strongly indicates that traders are seeing this defeat as an opening towards an extension of Article 50, rather than the start of a no deal Brexit. However, questions remain as to whether the pound will be able sustain these levels. That depends greatly on what comes next.

It is difficult to imagine that the pound will be able to move much above $1.30, given the level of uncertainty that remains. Whilst traders are taking the optimistic view and starting to believe that there is more of a chance of Brexit just not happening at all – that is definitely not the case right now. There is still significant ground to be covered before we even get close to Brexit collapsing.

Theresa May to win a vote of no confidence

Reports suggest that Theresa May will survive the opposition leader Jeremy Corbyn’s vote of no confidence on Wednesday evening, after her party rebels have guaranteed support to her. This then leaves the question what next for Brexit?

Theresa May has until Monday to say how she intends to proceed. Given the sheer scale of her defeat, this isn’t about a few adjustments to the deal but a thorough overhaul in its approach. With the clock ticking an extension of Article 50 looks almost certain. We can expect volatility to remain in the pound for the foreseeable future.


Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

The markets are moving. Stop missing out.

Open an Account