GBP/USD spikes lower to 1.2668 on leak of vote, Brexit vote confirms leak, the 'No's' have it, sterling climbs to 1.28 handle
- GBP/USD has steadied on the 1.27 handle on the back of the meaningful vote results that came out as 202 432 in favour of the 'No's.
- The focus is on the scale of this defeat and whether PM May is going to be able to come up with a plan B or not.
As expected, the Prime Minister May's Brexit deal was rejected in the House of Commons. However, the pound has rallied from the leaked results low of 1.2668 and has made a high, so far, of 1.2821. A loss of between 100 - 200 votes will likely spark initial fears of a no deal Brexit and spur the Labour Party's opposition leader, Corbyn, to challenge PM May's leadership of the government which would mean a general election and political chaos in the UK's parliament.
The opposition leader, Corbyn, has tabled a motion of no confidence and it will be debated tomorrow. This result has effectively left us where we are, leaving massive uncertainties over Brexit and should remain as a toxic cocktail for sterling and the UK economy. The government has lost the confidence of the public, and we will soon find out whether she still has the confidence in parliament. The clock is ticking, and things will likely happen fast from here.
From now on, the BoE will be pushed to the back of the minds of market makers and the pound is likely to remain under pressure over the coming weeks, possibly en route towards the post Brexit referendum low of 1.2000. Meanwhile, the PM May will now be looking for an extension of Article 50 which could, on the other hand, slow up supply for the pound as the UK moves towards contingency plans, or Plan B, from the Prime Minister. However, a fade on rallies would likely be the state of play for the foreseeable future.
Cable had already completed a falling wedge reversal pattern and was on the verge of a bullish breakout. The 200-D SMA loacted at 1.3112 is the key target. "Only a rise above the July, September and October highs at 1.3258/1.3363 would put the June high at 1.3473 on the cards," analysts at Commerzbank argued who suggest below 1.2444/27 will target the 78.6% retracement at 1.2109.