GBP/USD was well bid in the lead up to yesterday’s parliamentary vote. The pair traded to 4-month highs, that is until the Cooper amendment – a vote to avoid a no-deal – was rejected by 321 votes to 298 last night. Cable gapped lower by 80 points or so on the news but found good support under and close to the 1.31 figure as the Brady amendment, which passed by 317 votes to 301, gave Theresa May a mandate to go back to Brussels to try and renegotiate the withdrawal agreement, or moreover the future of the Irish border. The Brady amendment “requires the Northern Ireland backstop to be replaced with alternative arrangements to avoid a hard border; supports leaving the European Union with a deal and would therefore support the withdrawal agreement subject to this change."
However, many EU officials have been quick to say that nothing will change at their end. Within minutes of the amendment passing, a spokesman for Donald Tusk, the European council president said “the withdrawal agreement is, and remains, the best and only way to ensure an orderly withdrawal of the United Kingdom from the European Union…..The backstop is part of the withdrawal agreement, and the withdrawal agreement is not open for renegotiation.”
Nevertheless, the pound is holding up well this morning as traders reset and go back to monitoring Brexit headlines, for any signs as to whether either side are willing to give. We also have the small matter of the FOMC announcement this evening, perhaps less important than previous FOMC meetings/announcements given we’re unlikely to get a change in policy or too much of a change in the central bank’s language, but it still has the potential to cause further volatility in GBP/USD.