{"id":142796,"date":"2019-03-03T12:11:52","date_gmt":"2019-03-03T17:11:52","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=142796"},"modified":"2019-03-01T16:12:20","modified_gmt":"2019-03-01T21:12:20","slug":"the-trade-week-ahead-gbp-taking-off-the-brexit-millstone","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2019\/03\/the-trade-week-ahead-gbp-taking-off-the-brexit-millstone\/","title":{"rendered":"The Trade Week Ahead \u2013 GBP: Taking off the Brexit-millstone?"},"content":{"rendered":"<div id=\"inves-3655847235\" class=\"inves-below-title-posts inves-entity-placement\"><div id =\"posts_date_custom\"><div align=\"left\">March 3, 2019<\/div><hr style=\"border: none; border-bottom: 3px solid black;\">\r\n<\/div><\/div><div class=\"section-header\">\n<p><strong>By <\/strong><a href=\"https:\/\/www.fpmarkets.com\/\" target=\"_blank\" rel=\"noopener noreferrer\"><strong>FPMarkets.com<\/strong><\/a><\/p>\n<\/div>\n<p><iframe loading=\"lazy\" id=\"_dytid_3763\" src=\"https:\/\/www.youtube.com\/embed\/mB1ZRRlObnE\" width=\"720\" height=\"480\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\" data-mce-fragment=\"1\"><\/iframe><br \/>\nLike the \u2018constructive\u2019 phase the US-China trade war is moving into, Brexit appears to be moving into the \u2018agreement\u2019 phase in the Commons.<\/p>\n<p>This begs the question, the Brexit-millstone that has caused severe under- and de-valuation in UK assets possibly coming to an end, how high could Stirling go once Brexit falls off?<\/p>\n<p>First and foremost \u2013 where is the Commons at in the Brexit cycle?<\/p>\n<p>The latest amendments have created a \u2018runway\u2019 for the House (which was won by Theresa May this week). The 3-part runaway is as follows:<\/p>\n<p>1. March 12 \u2018meaningful\u2019 vote on whatever \u2018revised\u2019 Brexit can be reached with the EU (unlikely to be anything drastic). If this doesn\u2019t find a majority;<\/p>\n<p>2. The Commons will vote on a \u201cno deal\u201d Brexit. If this is rejected (which is fully expected);<\/p><div id=\"inves-1642009730\" class=\"inves-in-content inves-entity-placement\"><hr style=\"border: 1px solid #ddd;\">\r\n<div id=\"inpost_ads_header\">\r\n<p style=\"font-size:10px; float:left; color:#666;\">Free Reports:<\/p><\/div>\r\n<div id=\"inpost_ads\"> \r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/1ApBOV\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2018\/06\/graph_techs_PD.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t     <a href=\"https:\/\/goo.gl\/1ApBOV\"><b><u>Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p><br><br>\r\n<br>\r\n<br>\r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/f3RrHX\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2019\/01\/cot_pie_80.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t    <a href=\"https:\/\/goo.gl\/f3RrHX\"><b><u>Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p><br><br>\r\n<\/div>\r\n<hr style=\"border: 1px solid #ddd;\">\r\n<br><\/div>\n<p>3. The floor will vote on an extension of Article 50.<\/p>\n<p><a href=\"http:\/\/go.fpmarkets.com\/visit\/?bta=35137&amp;nci=5462\" target=\"_Top\" rel=\"noopener noreferrer\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/fpmarkets.ck-cdn.com\/tn\/serve\/?cid=361646\" width=\"728\" height=\"90\" border=\"0\" \/><\/a><\/p>\n<p>The runway clearly has a caveat to my point: \u2018no deal\u2019 is still on the table as is \u2018no Brexit\u2019.<\/p>\n<p>However, in practice, and from a GBP perspective, this week has shown that Theresa May has created a scenario where the parliamentary majority can rule out \u201cno deal\u201d Brexit by the end of March.<\/p>\n<p>As even the most sceptic-of-Eurosceptics will not want a Labour-led second referendum which could arise if a \u2018no deal\u2019 looks likely to pass the floor as Europhile Tories would cross the floor. Nor will the most pro-of-Pro-Europhile want to crash out over a deal that might not be perfect in their eyes scuttling the chance of a \u2018no Brexit\u2019.<\/p>\n<p><strong>Likely Scenarios<\/strong><\/p>\n<p>According to the latest consensus, the market believes the most likely course for Brexit will be the ratification of the Prime Minister\u2019s \u2018rehashed\u2019 Withdrawal Agreement after a 3-month extension to Article 50 \u2013 this sits at ~54%<\/p>\n<p>The probability of a \u2018no deal\u2019 has fallen to 10%, the probability of \u2018no Brexit\u2019 has fallen to 30%. There are a few other permutations, but in the main, these are the one that matter from a currency perspective.<\/p>\n<p><strong>Mind the Gap \u2013 GBP bounce<\/strong><\/p>\n<p>These scenarios have the GBP wanting to snap to the upside, the mere fact a \u2018no deal\u2019 is now the most remote outcome saw GBP shifting significantly higher. This is a clear sign the GBP want to move up. However, it\u2019s more than this, there are clearly investment-based \u2018flows\u2019 wanting to enter the UK once a deal is done which suggest a more structural shift over the medium term. It\u2019s not surprising considering the undervaluation of UK assets due to the Brexit-millstone. The fact GDP growth, which has been impacted Brexit no doubt, hasn\u2019t deteriorated to \u2018scorched earth\u2018 levels as the market had priced in the past is a testament to this. A release of Brexit will see a revaluation.<\/p>\n<p>As March progresses and the final outcome of the UK\u2019s separation from the European Union builds watch for entry points on pullbacks. Market consensus shows that most expect a 3% jump in EUR\/GBP to around 85.0\/20 on basically any deal. GBP\/USD is forecasted to move a little harder to $1.375\/378.<\/p>\n<p>Timing will be key, but it\u2019s clear the direction for GBP is up, just mind the volatility during the Brexit negotiation intervals.<\/p>\n<p><strong>Article by <\/strong><a href=\"https:\/\/www.fpmarkets.com\/\" target=\"_blank\" rel=\"noopener noreferrer\"><strong>FPMarkets.com<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>By FPMarkets.com Like the \u2018constructive\u2019 phase the US-China trade war is moving into, Brexit appears to be moving into the \u2018agreement\u2019 phase in the Commons. This begs the question, the Brexit-millstone that has caused severe under- and de-valuation in UK assets possibly coming to an end, how high could Stirling go once Brexit falls off? [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-142796","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/142796","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=142796"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/142796\/revisions"}],"predecessor-version":[{"id":142797,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/142796\/revisions\/142797"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=142796"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=142796"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=142796"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}