FxWirePro: Sterling sees fresh OTC hedging bids but unwise to jump the guns to jack-up GBP longs as Brexit dust still not settled

Sterling appears to be untradeable and remains in the firm grip of the ongoing Brexit drama, but the British currency seems to have discounted most of the bad news on current levels.

We have seen fresh positive shift in GBPUSD negative risk reversals, but IV skews have still been indicating bearish risks. Hence, mild rallies may be expected despite broad based bearish outlook.

We positioned for a modest but with a pinch of salt albeit distinctly bounded relief rally in GBP through a ratio put spread.

We hold a legacy put in EURGBP but without any visibility or insight as to how the political logjam over Brexit will be cleared. 

Yesterday’s vote in the House of Commons, that now makes it more difficult to (financially) prepare for a disorderly Brexit, illustrates: an increasing number of MPs, also from amongst the Conservatives, are no longer willing to be impressed by the Prime Minister’s threat of a no deal – they simply do not want it. 

The debate on the EU withdrawal agreement in the House of Commons today will be kicked-off by Brexit Secretary Stephen Barclay. The “meaningful vote” is now confirmed as next Tuesday evening (15th January). 

According to reports, the UK government is continuing to seek new assurances from the EU on the Irish backstop, while also denying it is seeking an extension of Article 50 (to delay Brexit) if the deal is voted down next week. 

Last night, the government was defeated on amendments to the Finance Bill, which may suggest that a ‘no deal’ Brexit will be more difficult to implement.

A positive vote about the exit agreement with the EU next week has nonetheless not become any more likely, instead May has merely lost scope to act. So please do not go ahead and buy Sterling hoping that a no deal Brexit has become less likely following yesterday’s vote. Beware of false hopes. Courtesy: sentrix, saxobank

Currency Strength Index: FxWirePro's hourly GBP spot index is flashing at -64 levels (which is bearish), hourly USD spot index was at -56 (bearish) while articulating at (10:11 GMT). 

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex