The Brexit Beat - Boris vs. Parliament: From Optimism to More Uncertainty

What happened?

UK Parliament held two key Brexit votes yesterday.

UK Prime Minister Boris Johnson won the first vote, support for the Withdrawal Agreement Bill in principle, by a 30-vote margin (329 vs. 299).

But he lost the second vote, the “programme motion” to fast-track Brexit law, by a 14-vote margin (308 vs. 322).

Labour opposition leader Jeremy Corbyn was, not surprisingly, harshly critical and called on Johnson to continue to work on alternatives, which would essentially be more of the same.

Johnson said the UK should accelerate preparations for a no-deal Brexit. He'll speak to the EU about their intentions and called for a pause in the progress of the Withdrawal Agreement Bill. He did not immediately call for an election, as some thought he would.

As it stands right now, the default outcome is still for the UK to exit the EU on October 31 with or without a deal.

How did the market react?

The pound (GBP) fell, but due largely to the current level of uncertainty, only by about 0.50% versus the US dollar. Trading volumes were reportedly light in the move lower. There was more activity in the FX options market, with hedge funds unwinding long GBP call options. Going into today’s votes, the FX options market had seen more bullish trades than the GBP cash market.1