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Parliament fails once again to form Brexit consensus

GBP - British Pound

UK MPs reconvened in Parliament once again yesterday in order to vote on alternatives to PM May’s proposed deal. No majority was reached and once again, May finds herself having to attend an emergency EU summit, in the hope of gaining a further extension to the UK’s departure from the EU, currently scheduled for April 12th. Despite May already securing a short extension from the initial departure date of March 29th, the EU are becoming increasingly more frustrated with the UK's indecision and how slowly the process is progressing.

Speaking on Tuesday morning, Michel Barnier, European Chief Negotiator for the UK, said: “No deal was never our desire or intended scenario but the EU 27 is now prepared. It becomes day after day more likely." In spite of those comments, Barnier also said a long extension to the UK's current 12 April exit date carried "significant risks for the EU" and that a "strong justification would be needed" before the EU would agree. In simple terms, the once-unimaginable concept of a no deal Brexit is becoming ever more likely, however if awarded with a longer-term extension, May will have more time to consider her 3 main opinions: a no deal Brexit, a general election or a softer divorce from the EU. If a longer extension is granted to the UK, we could see sterling strength, even in the face of a potential hard Brexit.

Key Movers

Elsewhere overnight the Reserve Bank of Australia disappointed the market once again whilst leaving its cash rate on hold. Whilst the statement from Governor Lowe was rather neutral in tone the market is now pricing in an interest rate cut before the end of the year.
Interestingly the basket that measures FX volatility has been tumbling over the first quarter of the year whilst sterling volatility has been increasing as Brexit continues to rumble on.

Expected Ranges

GBP/USD: 1.2995 - 1.3120 ▼

GBP/EUR: 1.1620 - 1.1710 ▲

GBP/AUD: 1.8330 - 1.8480 ▲

GBP/CAD: 1.7335 - 1.7450 ▼

GBP/NZD: 1.9180 - 1.9320 ▼