GBP/USD rallied all day, but this meant the news was very much ‘in the price’. Now, in admittedly thin trading, we are seeing cable move lower. This looks like a bearish rally, providing a fresh opportunity for shorts to target $1.25 and below, as the market realises the difficult outlook confronting the UK:
The vote, 200-117, was not a thumping result for the PM, and while it means she remains in place, it is clear that her authority has suffered a blow, especially given that it required a promise that she would not stay for the next election. The GBP had already rallied in expectation of the result, so the drop back from the highs is not surprising. But now the focus for sterling goes back to Brexit, and there the outlook is not at all promising.
Now that the vote is out of the way, we can go back to where we were 24 hours ago, and this is no comfort for investors. There is a deal ready to go, but it is still not going to pass Parliament. Thus, while the PM cannot be challenged for another year by her own party, she will not be able to get the deal through unless the EU grants some concessions. In previous incidences of popular discontent with the EU project, the bloc has provided some concessions, so we may see this again. However, it is still far from clear that Parliament’s various tribes will back any changes. The UK’s future, with the clock ticking down, is still very uncertain.
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