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Analysts at Danske Bank point out that in terms of GBP, the market reaction to Theresa May’s loss proved very limited in the House of Commons yesterday evening as the loss was widely expected and everyone continues to eye the vote on 27 February.

Key Quotes

“The EU is not willing to negotiate and make concessions if it does not know whether it will be sufficient. May has promised another vote by the end of February but she is unlikely to have anything new to bring forward then. So, right now it seems as though we have to get very close to the 29 March deadline (remember there is an EU summit on 21-22 March) or a small majority in the Commons will force May to ask for an extension of Article 50 by the end of this month.”

“Pressure is rising on all. We stick to our view that the two most likely outcomes are May’s deal passing eventually (40%) or a second EU referendum (30%). A no-deal scenario would probably happen only ‘by accident’ and we attach a 15% probability to this scenario. We still expect the 0.86-0.89 range in EUR/GBP to hold before we get more clarification.”