• Brexit deal defeated by margin of 230.
  
• Government faces confidence motion mid-week, should win.
  
• May intends to reach out to other parties, head back to Europe.
  
• Pound-to-Euro Exchange rate @ 1.1275.
  
• Pound-to-Dollar exchange rate @ 1.2858.

The British Pound powered back towards multi-week highs after parliament voted down the EU-UK Brexit deal by a margin of 230, with the Labour party responding to the defeat by calling a no confidence vote in the government, which will be debated Wednesday. This is likely to be a win for the government with both the Conservatives backing their government as well as the DUP.

If the government wins the vote GBP should not move greatly but with a defeat expect a big decline in the value of sterling.

On the decision of parliament Prime Minister Theresa May will look to engage all parties in the House of Commons and to hopefully agree on a deal that could be passed. May will then head back to Europe to see what additions the EU will be willing to offer.

The Pound's decline ahead of the Brexit deal vote came as no surprise but the upturn after the vote came as a surprise as well. Sterling's reaction is fascinating as the result was expected but in these volatile times you can never tell. Consequently GBP/USD rose sharply above 1.28 having dipped earlier in the day. This result can only be a possible improvement on any deal that is struck and now Sterling is likely to rise to the top of recent rises.

In short, the declines and gains are not based on any new information, if anything the real news out today concerning Germany being open to "further talks" in the wake of the deal being voted down is a real positive.

In response to the vote, the President of the European Commission Jean-Claude Juncker ran with this theme saying he urges "the United Kingdom to clarify its intentions as soon as possible". This suggests to us the door is open.

German Foreign Minister Heiko Maas announced that, “if it goes wrong tonight, there could be further talks.”

The next hurdle then will be the no confidence vote and then we also will see unknown volatility in the GBP market much more than the predicted loss last night.

Whatever the outcome for both corporate and private it is always best to evaluate potential movements against your budget rate to protect your volatile margins.

If anyone has any questions please do contact us on 01548 857009 info@southwestfx.co.uk