Sterling Pares Gains After MPs Vote to Avoid No-Deal Brexit

Source: Forex News

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.

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