Markets believe a no deal Brexit is now less likely to take place after MPs ruled out a no deal scenario in any case with a vote on Wednesday and asked the Government to seek a delay exit from the bloc on Thursday. Lyn Graham-Taylor, rates strategist at Rabobank, said: “We have seen a risk-on trade for Brexit in the last couple of days as the market thinks it is less likely we will leave without a deal.” And speaking about the pound exchange rate, George Cole, an analyst at Goldman Sachs, said: “For GBP, an extension increases the likelihood that the Brexit process moves towards even softer outcomes, including a customs union, single market membership, or a second referendum.”
Recent events in Whitehall have had a positive impact on the pound, which is on track for its best week since January, holding steady at $ 1.3255.
On Wednesday, after Parliament ruled out a no deal, Sterling recorded its nine-month high of $ 1.3380.
The odds of a no deal Brexit increased on Tuesday night, after Theresa May’s withdrawal agreement was rejected for the second time by Parliament.
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But MPs clearly expressed their views on a no deal scenario the following day, ruling out by 312 to 308 a no-deal Brexit under any circumstances.
On Thursday, they spoke in favour of an extension of Article 50, which could last until June 30 if Mrs May wins a majority during next week’s third meaningful vote, or until 2021, if Parliament and the EU agree on reopening talks and striking a different deal.
However, the bloc may reject the UK’s request for an extension, which needs to be approved unanimously by all of the 27 remaining member states.
Guy Verhofstadt, the European Parliament’s Brexit representative, questioned the rights of the UK to be granted a prolonged stay in the EU to avoid a no deal Brexit hours after yesterday’s vote.
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Mr Verhofstadt said: “I am against every extension, whether an extension of one day, one week, even 24 hours, if it’s not based on a clear opinion of the House of Commons for something.
“Please make up your minds in London, because this uncertainty cannot continue.
“Not for us, not for Britain and certainly not for our citizens.”