GBP: PM In Second Defeat On Article 50 Bill: EUR/GBP En-Route To 0.87 – Danske

Tonight, the UK government suffered its second defeat in the House of Lords in less than a week, as the Lords voted for an amendment to the EU bill demanding a ‘meaningful vote’ on the final Brexit deal (366 voted in favour, 268 voted against). On Wednesday, the Lords amended the EU bill by demanding protection of EU citizens currently living in the UK, see also Brexit Monitor #23: PM May still set to trigger Article 50 before ‘end of March’ despite defeat in House of Lords, 2 March. Note that the Lords voted against a second referendum on the final Brexit deal (a proposal by LibDems).

….EUR/GBP has depreciated recently and is currently trading at 0.866. We expect EUR/GBP to move higher in coming months ahead of and after the triggering of Article 50 and target EUR/GBP at 0.87 in 3M.

That said, EUR/GBP is not only affected by political uncertainty in the UK but also in Europe, not least due to the French presidential election, which may put downward pressure on EUR/GBP if Marine Le Pen gains momentum in polls and markets begin to price in a political risk premium in the euro.