Are we looking at an Extension to Article 50?
Sterling has made significant gains against the euro of late, hitting a 21 month high of 1.1723 yesterday.
The boost to the pound can be attributed to a higher probability of an extension to Article 50. If there is one thing that causes a currency to weaken it is economic uncertainty and with the Article 50 deadline of the 29th March rapidly approaching we could be looking at a bodged deal or indeed the dreaded no deal scenario.
It seems the possibility of an extension is now one of the likely outcomes and has eased investor confidence, sterling has benefitted as a result.
The next key date for GBP exchange rates will likely be 12th March when the next meaningful Brexit vote will take place. Theresa May suffered a record defeat in the House of Commons the last time her deal went before Parliament so this will be a key moment in Brexit following a delay on the vote originally set for February.
The deal at present has had very little change since it failed to go through so miserably in December. Unless May has a trick up her sleeve and has gained concessions on the Irish border I feel it is destined to fail again.
If it does fail, Parliament will vote on whether they will support leaving the European Union without a deal.
IF MPs then reject this, another vote will take place the following day regarding a three month extension to Article 50. I think this is the likely outcome which is likely to benefit sterling.
If you need to buy euros in the short term it may be wise to take advantage of current levels, don’t be greedy. I am confident sterling will remain fragile until we have firm news. I am doubtful a no deal will be completely ruled out as this is May’s only form of ammunition in negotiating the Irish border.
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