The British Pound has risen significantly in recent days because hopes of a Brexit deal with the EU have been growing all the time. Now the deal is actually here, and the Pound continues to rise. The chart shows the Pound vs. the US Dollar since 20th of September. Since the start of the big deal hope on September 10th, the Pound vs USD has risen from 1.2230 to currently 1.29. What a rise! But wait. The euphoria has its downsides. Tomorrow the British Parliament will vote on the deal. DUP, Labor and Scots have already announced their opposition. According to the latest Sky News estimate, Boris Johnson can unite 316 votes in the House of Commons behind him. He would just fail because he needs 320 parliamentarians to vote for his deal.
Failure no disaster for the Pound?
If Johnson wins the vote, then a lot of this deal euphoria is already priced into the Pound. This is because it has already risen so much. If he loses the vote, what then? Will the Pound crash? We would actually assume that. But if Boris Johnson were to lose the vote, there would probably be a referendum on the Johnson deal. The No Deal-Brexit would then hardly be a topic for debate. A current scenario can thus be expressed in short form.
Boris Johnson stressed last that this vote is the last chance tomorrow. Otherwise there will be a hard Brexit without a deal on 31st of October. But the Benn Act obliges him to ask the EU to extend the deadline for a Brexit if a deal is not made. And then there would probably be a referendum on Johnson’s recently agreed deal with Brussels.
Of course, we do not know how the Pound will react to tomorrow’s rejection of the deal in Parliament either. We all do not know that until Monday morning, when the currency markets start again. Of course there could also be a massive fall in the Pound on Monday, because we do not have the glass ball either! The scenario we mentioned earlier is only one scenario in which, even after a failure, the further process on the island remains fixed on a deal brexit. Not on a no deal brexit. But yes, there is also the other side, namely the EU. If Johnson asks for a postponement of the Brexit date, the EU member states will have to agree to it first.