The game of chicken on Brexit continued yesterday when the members of parliament voted against having a no-deal Brexit. This vote came a day after the same members rejected a deal that was presented by Theresa May. In the deal, the premier had received a commitment from European leaders like Jean-Claude Juncker that the country will be free to leave the customs union. This commitment was later rebuffed by the country’s attorney general, who argued that it meant nothing. He said that the country would need to ask permission from the European Union for it to leave the customs union. Without the attorney general’s input, there was a likelihood that the bill would pass.
After the vote released yesterday, the members will today vote to extend the withdrawal period. This motion is likely to pass. To investors and large businesses, this is a major outcome, that is better than having a no-deal Brexit. However, it also means that the country may be vulnerable as the extension will mean more uncertainty. This uncertainty means that businesses will have a difficult time planning for the future.
The votes are a major disappointment to Eurosceptic members of the UK. These members believe that the country should leave the EU on March 29, whether there is a deal or without. They argue that the country will move on, even if it leaves without a deal. They also agree that there will be chaos in the first few days. They also argue that the warnings that have been issued by large companies like Airbus and Rolls Royce as mere threats to pressure the parliamentarians.
After the vote happened, the GBP/USD pair jumped sharply and reached a 9-month high. This is because the worst-case scenario was already solved. Then, the pair started declining. This happened for two reasons. First, traders started pricing-in the uncertainty that will happen if the country fails to make a deal. Second, they are using the principle of buying the rumors and selling the news.
After reaching a high of 1.3375, the GBP/USD pair declined to a low of 1.3240, which was along the 21-day EMA but higher than the 42-day EMA. There is a likelihood that the pair will drop to the 1.3200 ahead of the next parliamentary vote.