The much expected Brexit Super Saturday ended up as an anti-climax. Voting was disrupted by an amendment put forward by Sir Oliver Letwin, asking for a delay in the House of Common vote so that the relevant laws necessary for Brexit implementation could be passed. This motion was passed by a vote of 322 to 306, defeating the UK Prime Minister’s mission to secure a passage of the new Brexit deal narrowly. It would also mean that Johnson would have to seek a Brexit extension.
So why is this twist such a big deal? In the first instance, it has temporarily put a hold on the UK Parliament’s approval of the renegotiated deal. Secondly, it also stops a no-deal Brexit from occurring, at least for now.
But the UK PM is not willing to back down. He said in his speech after the vote in the parliament, that the government would introduce legislation to ensure that Brexit occurs on October 31 with the new deal as negotiated last week with the EU.
With the entire process under a cloud of uncertainty, the British Pound could be in for a whirlwind Monday, even as Sir Letwin himself said on Sunday that he was ready to back the new deal since the no-deal Brexit had been stopped.
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Intraday Outlook for GBPJPY
The British Pound’s pairing with the Japanese Yen opened the trading week mildly lower, as markets still try to make sense of a confusing situation. The GBPJPY is currently trading at 140.15, having traded as low as 139.47 in the first hours of trading. It is expected that there will be some initial selling on this pair.
The setback suffered by the UK PM in not getting the deal approved by the parliament may be temporary. Some analysts have noted the close outcome of Saturday’s vote and are of the impression that a little additional support could sway the outcome of a repeat vote. Such support is likely to come from former cabinet minister Amber Rudd and some ex-members of the Tory party.
If a repeat vote sails through, we may see the GBPJPY surging back from any initial selloffs to reclaim new highs. The initial upside targets for such a move would be at 143.46 (highs of February 13 and price lows of March 29 and April 26 2019) and 147.22 (highs of July 2018 and April 3, 2019).
If the deal is not approved in a repeat Brexit vote, this could prompt a selloff on the GBPJPY. This could push the GBPJPY lower to test the initial downside target at 138.22 (January 10 low and the 10 June high in role reversal).
The situation will remain fluid as events unfold this week, starting from today.