Pound extends decline ahead of European trading
Cable touches a low of 1.3240
The pound is retracing gains from overnight trading after price failed to take out resistance at the 1.3350 level at yesterday's close. The UK parliament voted in favour to rule out a no-deal Brexit and that gave the pound added vigour but that isn't to last as the dust begins to settle on the reality of the situation.
May is pushing for a third meaningful vote by 20 March before European leaders meet on the following two days and should that fail, it remains to be seen if the European Union would be willing to grant an extension to the UK as so far parliament is unable to agree on what it wants to do next.
With that threat looming, it may just hold off gains in the pound for now but when push comes to shove, the odds are starting to work in the pound's favour realistically and logically.
If parliament votes to extend Article 50 later, it would mean May will push forward with a third meaningful vote and I reckon this time around she may be able to gather more support. Will it be enough though? That I doubt.
However, if parliament doesn't get behind that, the good news is that there won't be a no-deal Brexit outcome by 29 March. That said, unless they can agree upon something - basically anything - then this is merely kicking the can down the road and invoking more Brexit uncertainty for the UK economy.
For cable, the fact that price is holding well above the 1.3000 handle shows where the skew is in terms of market expectations. It's basically a buyers' market and all they are waiting for is some concrete information that we're headed for some kind of deal or second referendum and the pound is going to take off from there.
Watch out for the region between 1.3350 to 1.3400. If that breaks, expect cable to soar.