Tough days ahead for GBP
It was always going to be a tough week or so for GBP as we look forward to the meaningful vote in the House of Commons next week when parliament is set to vote on the current EU deal on the table. All the signs are there that this will not pass, and we look set to endure a prolonged period of to and fro between the UK and EU as both sides try their hardest to avoid a disorderly withdrawal.
Last night was a busy one for parliament, debating well into the night - and morning - on the Brexit deal at hand. Earlier on in the evening, parliament passed a motion to hold the government in contempt, and have forced them to reveal the full legal advice document which is to be published later on this morning between 11.00 and 11.30am.
Also passed, was a motion that parliament gets a say in the Brexit process if the deal is voted down next week, and this has led to a belief that the UK may indeed abandon Brexit if there is no compromise on how MPs move forward with a majority. This view has been enforced by the European Court allowing the UK to unilaterally revoke Article 50, the process which kicked off the move to exit the EU. The odds of the UK now staying in the EU have risen, and this has given GBP some temporary relief with Cable moving back into the mid 1.2700's this morning.
Last night we saw 1.2700 breached, with stops taking us down to lows a touch under 1.2660, though as we have noted, there is a very strong band of support seen in the 1.2500-1.2600 area, and it will take a significant development - perhaps the vote against the Brexit deal (even if it is anticipated) next week.
EUR/GBP has tested above 0.8920-25. However, there is little momentum to carry the cross any higher, so for now, these levels are containing the cross rate.
UK Services PMIs this morning are unlikely to cause much of a stir given where the focus lies.