In a dramatic series of events this evening, Theresa May’s conservative government has lost the first pivotal Westminsterial vote on her Brexit deal. Suffering a vote of no confidence as a result of her landslide loss in her government, Theresa May’s government is limping but still standing, at least for now. In the minutes leading up to the vote and in the seconds that followed it, Sterling took a dive, selling off in swathes and droves. Despite a losing majority of 230 votes (432 to 202), traders failed to punish the Pound, instead rewarding the Pound with an additional value of 1.36% against the US Dollar and 1.18% against a similarly appreciating Euro. A loss of this scale has not been seen since 1924 amongst a disunited British parliament. The appreciation in Sterling appears to be driven by a liquidation of short Sterling positions, allowing the British Pound to climb higher. Murmurings across the wires also suggest that the devastating defeat diminishes the probability that a majority could be found within Parliament, therefore leaving the exit plan dead in the water. In turn, given the increasing improbability of a no-deal Brexit, the corresponding probability of a Brexit in and of itself decreases, lifting the Pound. The story of the Brexit deal is not over and parliamentarians will return tomorrow to debate the no confidence vote. Let the rat race begin!
Discussion and Analysis by Charles Porter