3 Reasons For The Surge Of GBP/USD And Where Next

The UK Parliament has rejected a no-deal Brexit on Wednesday in a stricter manner than the government wanted. The Spelman amendment forced embattled PM Theresa May to try to reject the motion and she failed on this as well.

After rejecting a no-deal exit, Parliament will now instruct the government to ask for an extension of Brexit. This was the original plan, but some significant developments made a difference.

Here are three reasons for the rise:

1) EU considering a longer extension

According to reports from Brussels, some countries see a short Brexit extension as useless as Parliament is divided. So, they are considering a long extension. Previous reports suggested a 21-month delay. A long delay opens the door to having no Brexit at all. A different scenario with possibly similar outcome talks of forcing the UK to revoke Article 50 altogether in order to avoid a hard Brexit, also lowering the chances that the EU ever leaves.

2) DUP considering supporting the deal

The Northern Irish party that the government depends on is reportedly willing to support May’s Brexit deal to avoid the risk of losing Brexit altogether. These reports are yet to be confirmed but have sent the pound higher. PM May will reportedly have a last-chance meaningful vote on Wednesday, March 20th. On March 21st, the EU Summit is due to discuss an extension to Article 50 in case this third Meaningful Vote (MV3) fails, which remains the most likely scenario.

3) Conservatives ready to rebel for Remain

The Brexiteers are not alone in voting against the government. The votes on Wednesday night showed that not only are MPs willing to vote against the government but ministers are willing to at least abstain and not fear their firing. With Remainers fighting back, there is a better chance of a softer Brexit.

The opposition moving towards a softer Brexit: The opposition Labour Party seems to have stopped just rejecting the government’s Brexit deal but is working on an alternative Brexit, presumably with Conservative members as well. A new plan may force the government to rethink.

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