According to Jane Foley, senior FX strategist at Rabobank, GBP has taken some comfort from news that a Brexit delay bill would likely be approved by lawmakers.
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“May has been warned that is she were to attempt to block her ministers from supporting this bill, several could resign. From the perspective of GBP investors, this would remove the most bearish scenario from the table – at least for now. However, it doesn’t solve the issue of finding a compromise Brexit deal that would provide businesses with the certainty that they need.”
“By the end of January 29th, it is possible that MPs will have removed the risk of a hard Brexit in March. This is positive news for the pound. However, if this amendment is passed it would increase the risk political wrangling will continue for months.”
“The longer political uncertainty drags on, the greater the impact on the real economy.”
“We continue to forecast a move to EUR/GBP 0.87 on a 3 month view. This assumes that a Brexit deal will be found.”
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