Brexit Vote and the Pound: Analyst Predictions

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Rolling updates on what the currency pundits are saying ahead of tonight's key parliamentary vote on the EU-UK Brexit deal.

Pound Sterling has seen a swing of fortunes in the hours leading up to the Brexit vote with gains giving way to some deep losses against a host of major currencies. We believe this kind of volatility is typical of what can be expected around important events such as the vote. 

The deal is widely expected to be defeated and most political commentators are calling the loss to exceed 100 MPs: the loss itself is irrelevant, instead the scale of the loss could be where the focus of currency traders will lie.

Sky News analysis suggests the government is facing a loss by a majority of 226 votes, this analysis based on MPs stating their intentions publicly or to their news team. This represents a sizeable, indeed historic loss, for the government, but these are not ordinary times as we would expect the Prime Minister to immediately detail her next steps.

How will Sterling react to the outcome, how long will that reaction last, and what comes next? Foreign exchange analysts are frantically briefing their clients and the media with their predictions.

Stephen Gallo, European Head of FX Strategy at BMO Capital:

"The margin of loss in today’s meaningful vote will be the primary concern for FX investors, but multiple permutations will likely stem from the final result.

"Under normal circumstances we would say that upside GBP risks outweigh downside ones but FX market illiquidity is preventing us from making that call.

"Due to the liquidity dynamic in the GBP we are loath to assign a 24-48 hour range for GBPUSD but our best judgement is 1.2550/1.3200 (assuming the government loses).

"Despite the recent chatter about a Brexit delay we still think the odds of a “no deal” scenario on March 29th are as high as 45% (and they could go higher)."

Mark McCormick, North American Head of FX Strategy at TD Securities:

"Today's Brexit deal vote is the key risk event this week. With expectations of a heavy defeat leading to a delayed Brexit already priced in to some extent, the aftermath of the ballot could be particularly volatile. The outcome may increase rather than ease UK political uncertainty, suggesting Sterling could remain under pressure against key trading partners."

Viraj Patel, FX & Global Macro Strategist at Arkera:

"The Pound is inching towards pricing in a positive outcome (May win, narrow defeat) from today’s Meaningful Brexit Vote. Looks a tad too optimistic even for a GBP bull like me. Next 48 hours could be noisy if govt loses big (ie, no confidence vote)."

Ali Malik at FairFX:

"A defeat for May is largely priced in as the Pound’s one month volatility stands at 12.63 percent, only slightly above the yearly average of 8.8 percent; indicating that any sharp moves in Sterling aren’t really being considered at this stage. That being said, a heavy defeat of 200+ votes for May could well see a knee-jerk decline in GBP/USD that would see it return towards the bottom of its current range."

JR Zhou, Market Analyst with INFINOX:

“Sterling’s strength is predicated on the idea that it will be a Goldilocks defeat for Mrs May – neither too crushing nor too narrow – that allows her to stay in office and ultimately delays, softens or even blocks Brexit.

“However there are risks aplenty. Too big a margin of defeat and the Government could face a no-confidence vote, raising the prospect of a snap general election. Too narrow a defeat and Mrs May may double down on her deeply unpopular deal and accelerate further into the current Brexit cul de sac."

Zoe Dawson-Williams, Chief Customer Officer at Moneycorp:

"We're braced for a potentially big reaction from Sterling before, during and after today's vote, just as we saw with the original referendum result when we traded a month’s worth of volume in a single day. Monday afternoon saw GBP strengthen 0.50% on the back of an unsubstantiated voting rumour, so we are definitely preparing ourselves for a volatile day. Many of our customers, both corporate and private, have already hedged against potential movements against their budget rate, and our global team will be working long into the night on Tuesday and early on Wednesday morning to support them."

Prepare for moves in Sterling and order your ideal exchange rate in advance. Foreign exchange specialists at RationalFX will be working extended trading hours today to deliver advantageous rates to their clients. To get in touch with the team at RationalFX, please see here.