With Prime Minister Boris Johnson having secured a new Brexit deal with the EU, the outcome now depends on super Saturday – when MPs will vote in Parliament on the deal – and whether Johnson can get sufficient backing. This goal already seems tricky given the Democratic Unionist Party have refused to support it.
In our view, sterling would be moving significantly higher on the back of this deal announcement if the market expected it to pass smoothly, but the currency is falling against the euro, at the time of writing at least. That said, sterling has risen a fair bit in recent days, but could now remain in limbo until Parliament decides what happens next.
To rally sufficient support, Johnson is going to have to persuade 20 plus Labour MPs to back the deal, along with the dissenting Tory MPs he recently expelled. In our view, this is a tall ask and we expect sterling to remain volatile until then. All the action will likely take place on Sunday night when the currency markets react to Saturday‘s vote.