GBP/USD: Will The Ayes Have It? If Not, Expect A Downfall

“We’ve got a great new deal”, tweeted UK Prime Minister Boris Johnson and set alight sterling’s surge. GBP/USD has risen some 800 pips within a week as a deal became a reality. The next move depends on the parliament approving the agreement. The critical vote on Saturday and also the events that follow are crucial.

This week in Brexit: Deal in Brussels

Intensive Brexit negotiations seemed to be losing the momentum it early in the week. Cautious comments from negotiators in Brussels were unable to seal a quick deal after last week’s breakthrough made by Johnson and his Irish counterpart Leo Varadkar. Chief EU Negotiator Michel Barnier called on the UK to inject fresh “political impulse – and that arrived on Wednesday. ”  Reports of a draft deal then helped cable top 1.28.

The focus shifted from Brussels to London, where the PM tried to convince the Democratic Unionist Party (DUP) to back the accord. The small party from Northern Ireland (NI) was unhappy with keeping the province – at least de-facto – within the EU. The party’s raison d’etre is holding up the union of the United Kingdom, and having a customs border in the Irish Sea was hard to swallow. Moreover, the accord includes a new mechanism for changing the current arrangements – stripping unionists from their veto.

And then, on the morning of the EU Summit, Johnson decided to ignore the DUP’s reservations and sign off on a deal. GBP/USD nearly hit 1.30 before falling as the DUP vowed to vote against the accord. On the other hand, the PM has secured the support of some of the hardliners in his party, known as the “Spartans.” A handful of opposition Labour MPs also announced they would back the PM. But will it be enough to muster a majority?

European Commission President Jean-Claude Juncker seemed to rule out an extension to Brexit, perhaps trying to help Johnson push MPs to support for a deal. However, it is up to heads of states – not Juncker – to accept or reject an extension.

The focus now shifts to Westminster.

Next in Brexit: All eyes on Saturday’s vote and its aftermath

For the first time since the Falklands war of 1982, the House of Commons will sit on a Saturday. Speaker of the House John Bercow has allowed for an ample debate of the deal and finally vote on it. The stakes are high, and the latest estimations are showing that the vote will be extremely tight. Various media outlets have calculated that the government may lose by two to nine votes, and Johnson is set to work around the clock to convince MPs to get behind the Brexit deal.

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