MUFG Research discusses the latest Brexit developments.
"The best outcome for the pound today would be if PM May’s Brexit deal was passed as it would help to further dampen Brexit uncertainty in the near-term. It would encourage the pound to extend its advance towards the 1.3600-level against the US dollar, and further into the low 0.8000’s against the euro.
However, we still judge that PM May has less than a 50:50 chance of her passing her amended Brexit deal today. In contrast if the vote is defeated as still seems likely, the pound will give back the gains from recent days. A narrower defeat would help to dampen pound downside risk and give encouragement that an acceptable Brexit deal is moving closer. MPs would then have the opportunity to vote on Thursday to force the government to request an extension to Article 50 to allow more time for negotiations to continue," MUFG notes.
"MPs have indicated that they will also attempt to exert even more influence over Brexit proceedings by pressing for indicative votes on alternative Brexit options to find a way forward to break the deadlock in parliament. A likely request to extend Article 50 and a potential shift to a softer Brexit outcome should help to dampen pound downside as well if PM May’s deal is rejected heavily again today," MUFG adds.