Events in British politics and their possible impact on the pound are gradual emotions like the best thriller. Investors have been expecting huge changes in British currency prices since the end of last week, but they are dependent on a key vote in parliament.
There are many indications that just today (October 22) the expected huge volatility in GBP currency pairs may be realized. One-day expected volatility for GBP/USD remains elevated because investors position themselves before the second reading vote. This vote will show whether the UK Parliament supports the withdrawal agreement.
Still, one-day volatility remains below the highs seen since October 16, suggesting that investors are confident that Prime Minister Boris Johnson has the necessary number of votes to get a deal on Brexit in parliament. The range of changes in the GBP/USD exchange rate estimated by options investors at the time of voting is around 180 pips. Therefore, this value is slightly lower than the volatility that we observed at the end of last week but still relatively high.
The voting hour was set at 19 London time or 20 Polish time. Then the deputies will vote on whether they agree to the terms of the agreement negotiated by Prime Minister Boris Johnson, but will also vote on the entire process of the legislative program, which presents the next stages of work on the bill in the House of Commons. The task will not be easy, because the content of the act is on over 100 pages, and the document was published on Monday evening. Due to the significance of this Act and only 24 hours to read it and submit amendments, some Members have already signaled too much rush and too little time to analyze the content of the Act.
Therefore, for the British pound currency pair it promises to be a very exciting evening, and at that time the GBP/USD exchange rate remains at around level of 1.3000 after the previous best rally since the beginning of 2018. A positive vote could be an additional stimulus for rise for the pound. In turn, a negative vote could lead to a collapse in the British currency.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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