UK Parliament to sit this Saturday – using weekend markets to trade the event

For the first time since 1982, the House of Commons will sit on a Saturday. This is to allow the UK’s lawmakers to discuss the Brexit deal brought back from Brussels by UK Prime Minister Boris Johnson.

Of course, to be worthwhile, such a sitting requires an actual deal to exist before one can be debated. While the recent summit between the British and Irish prime ministers went well, it still requires the EU to agree to a deal, with intensive negotiations likely before this. Even if a deal comes back from Brussels, it must be agreed by Parliament, and given the potential conditions that may be attached, it may not be voted through.

Trading the parliamentary sitting with IG’s weekend markets

This parliamentary sitting means that markets will be watching what is said over the weekend, at a time when markets are normally closed. IG’s weekend markets allow investors to trade as the sitting unfolds, and also when the House of Commons votes on a deal.

This all-day sitting provides the potential for enhanced volatility, especially if the vote is closely poised. As a result, investors should be careful to employ strict risk management, just as would be the case for weekday markets.

GBP/USD: how has the pound reacted

Over the past few days, the pound has succeeded in spiking to its highest level against the dollar since mid-June, while against the euro it reached a five-month peak. In part this is due to the high level of bearishness on sterling, as major institutions had been positioned for further falls in sterling as a result of Brexit deadlock. To an extent, therefore, this bounce in the pound represents a ‘short squeeze’, as traders of all sizes see their stops hit, closing out positions as they ‘buy back’ their sterling shorts. This drives the price higher, forcing others to do the same, creating a feedback loop.

Now that the squeeze has happened, it requires fresh positive news to drive the price higher. If the EU and UK can make more progress on a deal then more upside may result. However, further positive news may not be forthcoming. EU sources are very downbeat on the prospect of a deal, and on the UK side the DUP and the hardline European Research Group (ERG) have either said they will vote down any deal that includes a backstop or have remained cautious on providing their support.

Nonetheless, the appearance of progress this week may help to provide some reason for optimism about the prospect of a deal. There is clearly some agreement on both sides, and an extra three months might give both sides the space they need. Alternatively, any extension may be wasted as the UK endures another general election that is unlikely to provide a firm result, meaning that we will simply repeat this whole process in a few months’ time.