UK parliament rejects “no deal” Brexit

It continues to be something of a roller-coaster for sterling, albeit within still relatively narrow trading ranges, with the pound (re)strengthening against the euro and the dollar, to around 85p and $1.33 respectively, after the UK parliament last night fairly decisively ruled out a “no deal” Brexit under all circumstances. Meanwhile, the single currency has been on the front foot this week and is trading just north of $1.13 this morning. Elsewhere, UK bonds are leading a move higher in yields in the core markets following last night’s developments

Notwithstanding the vote in parliament last night, the legal default under Article 50, which supersedes everything else, is a no deal Brexit at the end of this month. Of course this is where an extension of Article 50 now comes in, and parliament will be voting on this tonight. PM May has said she will put her deal to another vote (the third) in the coming days. If it passes, she will seek a “technical” extension to Article 50 to the end of June. If the deal is defeated again,  she says the EU27 will then want to know the purpose of an extension (MPs may need to decide this in the coming days), a longer extension would likely be needed, and the UK would have to participate in the European Parliament elections in May . The EU27 will consider any request for an extension at next week’s  Council meeting (remembering that it’s up to the UK to request an extension but in the gift of the EU27 to grant one)

Heightened Brexit uncertainty is weighing on the UK economy and The Office for Budget Responsibility (OBR) has lowered its forecasts for GDP growth this year and next year, to 1.2% and 1.4% respectively. Uncertainty is also weighing on the housing market, with the latest RICS survey reporting another decline in house price expectations and a continuing fall in new house buyer enquiries

Data due today include Q4 and full-year 2018 GDP here at home, as well as jobless claims and import prices in the US