No Deal Brexit Chances Low But Uncertainty Still Reigns Ahead of Vote

Britain’s plans to leave the European Union could be thrown into disarray by a vote in parliament later on Tuesday but bets are mounting that a chaotic no-deal Brexit can be avoided and that sterling will rise from here.

After slumping 7 percent in 2018, the pound has started the year on the front foot. It scaled $1.29 on Tuesday, hours before British lawmakers are due to vote on the withdrawal agreement Prime Minister Theresa May negotiated with the EU.

They are expected to reject the deal, barely 2-1/2 months before Britain is due to leave the bloc, opening up a range of outcomes, from quitting with no agreement on future relations to halting Brexit altogether.

But even amidst the tumult some investors are starting to view medium-term sterling valuations as decently priced, market positioning overly negative and the dollar topped out.

They reckon the chances of a no-deal Brexit — long seen as the worst case scenario for the pound — are diminishing as parliament exerts greater control over the process.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza