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“Short positions in GBP are around 40% smaller than they were at the time of the last meaningful vote and we suspect GBP/USD may struggle to break above the 1.33 area over the coming weeks,” notes  Chris Turner, ING’s Global Head of Strategy and Head of EMEA and LATAM Research.

Key quotes

“It’s a big week for Brexit, and UK parliament looks set for a series of votes on what it really wants from Brexit. Will it approve May’s deal tomorrow, confirm it doesn’t want a ‘no-deal’ Brexit on Wednesday and formally back an Article 50 delay on Thursday? Or will the EU’s final answer not emerge until the EU Council meeting on March 21-22nd?”

“Despite various event paths, participants in the FX options market think we’ve now reached crunch-time. The term structure of the GBP/USD volatility curve is now steeply inverted and shows a market prepared to pay higher prices for implied volatility (insurance in the FX market) for the next two-three week period than any timeframe much longer.”

“The expectations in the FX options market can also be viewed in terms of GBP/USD pricing, where over the next two days a move over 140 USD pips, i.e. 1.3190 or 1.2940 away from the current spot price of 1.3050, would be required to deliver a larger move than is currently priced.”