The Prime Minister said in a speech on Friday that unless the Parliament agrees to her trade-deal proposal the divorce negotiations might be prolonged indefinitely or they may never even take place, suggesting that a no-Brexit is still an option.
However, the fact that she did not state that she is open to the idea of a second referendum on the issue means that it is more likely that she used a no-Brexit argument as a last-ditch attempt to sway over the Parliament, which rejected the same proposal with an astonishing 230 majority vote in January.
This warning comes just days after it became known that the PM had agreed to extend the deadline for the negotiations of a trade deal with Parliament, to give her more time to adjust her stance and push it through successfully. The news was received positively by the market and the GBP appreciated with more than 1% against the other major currencies on the 26th of February, however, this time Theresa's vocal threat did not receive such a positive review, and the GBP slipped once again into negative territory.
A no-Brexit scenario is not really what fuels investor concerns. The real point of distress for the market is the fact that Theresa's plan is likely to get overwhelmingly rejected once again in the next Parliament vote on the 12th of March perceived as pushing the cabinet one step closer to a hard Brexit, which is going to have detrimental consequences for the British economy.
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In any case, next week is going to be volatile for the GBP with expected price swings in either direction, depending on the result of Tuesday’s voting in Parliament. We are going to watch the situation as it develops and cover the outcome in next week’s market recap.
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