The pound closed at a high on Friday after investors were optimistic that a deal would be passed in Saturday’s parliamentary sitting of MPs. Having closed just below $1.30, it has opened 0.6% lower this morning after MPs voted to approve the Letwin amendment to the deal, meaning that the UK’s exit date would have been delayed until February 2020 regardless of a deal passing. The government were unhappy with this so then withdrew the vote on the deal, aiming to reschedule it to today.
Boris Johnson has sent an unsigned letter to the EU asking for an extension, to which the EU has said they will not grant one if the vote on the deal is passed through parliament. However, a vote might not be allowed to take place by the Speaker of The House as it is technically considered debating the same matter twice. Additionally, whether the government has a majority for its deal, the chance for cross-party “wrecking” amendments, such as Labour’s customs union pledge or a confirmatory referendum, remains high.
The pound has fallen in light of new uncertainty; however, investors remain confident this fall will not continue to previous lows as the risk of a no deal exit still appears to have subsided in the near term.
GBPUSD opened at 1.2863 and make steady gains across the day, closing at 1.2927. In early Asian trading yesterday, the pair fell to 1.2878 after the vote in parliament.
GBPEUR opened at 1.1561 and followed a similar but less exaggerated pattern due to euro strength. The pair closed at 1.1586 and fell back to 1.1571 in early Asian trading.
The dollar fell sharply against the euro on Friday as the single currency benefitted from the increased hopes of a Brexit deal with UK, which has reduced the chances for a recession in the eurozone. The euro gained 0.32% against the dollar while the dollar index fell 0.31%, down 1% for the week. Some analysts assign a close to 80% chance of a rate cut at the October 30th meeting.
Elsewhere the Chinese yuan was steady against the dollar despite weak economic data showing the slowest pace of growth in almost three decades, primarily blamed on the trade war with the US affecting manufacturing production.
EURUSD opened at 1.1126 and made steady gains across the day, closing at 1.1158 and reaching a high of 1.1172 later in the evening