FX March 13, 2019 / 11:57 pm UTC

GBP/USD, EUR/GBP Flows: GBP Eases After the Solid Rally With No-deal Brexit Rejected

By Ken Loong Hoe
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The Sterling Pound is retreating in the Asian morning following the spectacular rally on Wednesday. GBP shot higher before and after a no-deal Brexit was voted out, squeezing higher ahead of a vote on Thursday on an extension to the deadline for the UK leaving the EU. Traders were also encouraged by hints from Chancellor Hammond that he was open to a compromise deal with other parties, and talk that Thursday would see indicative votes on alternatives

GBP strength looks to be excessive and vulnerable for a fall. Expectations for the delay have been priced in for some time now, and moreover, the conditions for and length of the extension are still very unclear. The EU might not like what the UK has to offer in return for an extension and the UK might still leave without a deal.

Cable stretched beyond Feb's high slightly, not without a little help from the weaker dollar. With that many uncertainties ahead with regard to Brexit, it is hard to see much more room above Feb's high on the Cable. We should see EUR/GBP returning toward the 0.86 level ahead of the weekend where more Brexit headlines can be expected. According to the Times, PM May is preparing a deal for a third vote scheduled by March 20.

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