Sterling (GBP) Talking Points: Expect Increased GBP Volatility Through the Week
- It still looks unlikely that PM May’s Brexit Bill on Tuesday will be passed.
- Sterling volatility is expected to increase further.
The DailyFX Q1 GBP Forecasts [1]are available to download including our short- and medium-term look at Sterling.
Fundamental Forecast for GBP: Neutral
Next week the UK Parliament will vote on a series of Brexit Bills which will decide the short- and long-term future relationship between the UK and the EU. On Tuesday, PM May’s current Brexit Bill is re-presented to the House and is likely to be rejected again, although the margin will be slimmer than the sizeable 230 vote defeat in mid-January. If this is the case, on Wednesday the House will vote on whether a No Deal Brexit should be left on the negotiating table, leading the way to Article 50 extension vote on Thursday. As we stand, the EU remains unwilling to change any part of the Withdrawal Agreement, notably the Irish backstop, although both parties will continue talks over the weekend as both sides strive to avoid a potentially ruinous No Deal Brexit. While nothing has changed as we write, by this time next week there will be greater clarity on this long-running saga.
The domestic Economic data calendar is dominated by a raft of releases on Tuesday, including trade balance figures and industrial and manufacturing production numbers. While these remain important, the Brexit vote in the evening will dominate market thoughts.
GBPUSD[3] has edged lower over the week but remains resilient to larger downside moves. Part of the pair’s weakness is down to US
