GBP/USD could trade below 1.27 - TDS

Analysts at TD Securities suggest that in the UK, the big vote on Theresa May's Brexit deal takes place tonight (GMT), with the vote happening around 8pm GMT.

Key Quotes

“We expect a significant defeat, with about 70 Conservative MPs not supporting the deal (for a loss margin of around 150, depending on abstentions).”

“We think holding cash positions over the event offers a very poor risk/reward profile. We would rather re-engage once some of these risks subside. Our base case suggests GBPUSD could trade below 1.27 but find buyers ahead of 1.2615.”

“A narrow defeat would boost hopes that eventual passage is still possible and could see spot rally toward 1.32. A crushing blow, in contrast, increases tail risks in both directions with a very volatile reaction in markets likely. Hopes for No Brexit may prevail initially, but the risks of No Deal will also cast a long shadow.”