Look out for a short-lived relief rally
Time is running out for Theresa May as she has very much exhausted all her options ahead of tomorrow's meaningful vote in parliament over her Brexit deal. She is now left with two choices. It's either she carries on with the vote and suffers what appears to be an imminent defeat at this point in time, or she postpones the vote altogether in hopes to buy time to either attempt to convince European officials of a better deal or attempt to win over support from other parliament members.
Whatever the choice is, it's an unfavourable one for May and will see confidence towards her leadership crumble. But for the pound, there's still hope for an unlikely source of comfort in one of those outcomes.
A rejection tomorrow would no doubt be a major setback for May and the pound but if May decides to postpone the vote tomorrow, I would expect the pound to see some near-term relief (possibly towards 1.28 and at most 1.29 for cable). Despite the fact that May will be on the receiving end of a major backlash in the UK, it at least presents some hope that a no-deal Brexit may be avoided. That little bit of hope is what will give the pound a bit of a jolt higher but don't expect it to last.
As with all things Brexit, the picture is very much muddied and even if May postpones the deal, she's not going to get any favours from European officials on the matter. They have been adamant that there won't be any changes to the deal and that means May is left to her own devices to try and win over parliament before any vote; tomorrow or postponed.
Hence, if there are no significant changes to the situation, we're still staring down at the same situation but just that with a tighter timeline. And that makes any reprieve for the pound arising from a postponement of the vote one that will be short-lived.
