Brexit Update
The odds for a delay have declined while the odds for a disorderly no-deal Brexit look to have grown with the UK Parliament rejecting two amendments that would have delayed Brexit in the event a withdrawal deal is not struck by mid February.
Parliament also voted for Prime Minister May to return to Brussels to try and win a concession on the Irish backstop — but this was both promptly and flatly rejected by the European council president, Tusk, who said that the existing Withdrawal Agreement is “the best and only way to ensure an orderly withdrawal” of the UK from the EU.
The amendment proposes to replace the Irish backstop with “alternative arrangements” to avoid a hard border reality between Ireland and Northern Ireland post Brexit, though May and her allies have not specified what these arrangements are.
In any case, given the implacability of the EU, this looks to be a moot point. May will have until February 13, and if no new deal is forthcoming by then, her government will table a statement about what it plans to do next and allow Parliament to vote on it on February 14.
One cause for optimism is that the leader of the Labour opposition, Jeremy Corbyn, will now be talking with the PM having hitherto refused to do so, suggesting there is hope for a cross-party consensus being formed on an alternative withdrawal plan. While Parliament also voted for an amendment that declares its opposition to a no-deal Brexit, this is nonbinding and aspirational.
The Pound tumbled by nearly 1% versus the Dollar in the wake of the votes, during the New York PM session. Currently it is trading at 4-day bottom, near 1.3070. If the pair continues to the downside, is likely to be supported by 200-day EMA, at 1.3035. Further losses could lead to 10-week Resistance converted to Support now, at the round 1.3000. Immediate Resistance holds at PP level at 1.3106, which coincides with 20-period SMA in the hourly chart.
Intraday momentum indicators are negatively configured, suggesting further steam to the downside for the pair.
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Andria Pichidi
Market Analyst
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