Neil Wilson, chief market analyst at Markets.com, told This is Money that whatever the result, traders should anticipate ‘considerable volatility’ as news flow from Westminster directs price action.
He added: “The question is whether the imminent disorder is fully priced – it seems unlikely that the market really reflects where we are about to go on Brexit, albeit the lie of the land is more favourable for pound bulls longer term, i.e. a higher chance of a no-Brexit or very soft Brexit.
“Extension of Article 50 seems likely if this deal fails and Jeremy Corbyn manages to force an election.
“But similarly, the no-deal risks rise by the day with March 29 just a couple of months away.
“As previously argued, either of the extremes is still the most likely outcome.’
Mid-caps – companies with a market capitalization between $ 2 billion and $ 10 billion – slipped as investors continued to be wary ahead of a crunch vote on British Prime Minister Theresa May’s Brexit plan
Sterling remained flat on the dollar in rough trade before the vote but stayed close to a 2-month high of $ 1.2930 it hit on Monday.
CMC Markets analyst Michael Hewson said of the vote: “Of course, we could get a situation where the vote gets passed, but given the polling numbers that looks about as likely as finding a unicorn.”
Founder and chief executive of deVere Group Nigel Green added the exclusion of a ‘no deal’ option and the ensuing dilemma could see economic recovery.
He said: “If it is passed, sterling will rally sharply as the prospect of a no deal, and/or months of further uncertainty ends.
“Sentiment towards UK stocks will also rally, particularly given the attractive valuations of many UK companies.
“However a strong pound may dilute the impact on exporters, as their earnings in dollars and euros, amongst others, will become less valuable in sterling terms.”
According to Mr Green, this may lead the Financial Times Stock Exchange (FTSE) to attempt offsetting this effect.
He says: “The FTSE 100 may underperform small and mid-cap stocks in the relief rally that follows the Bill’s passing.
“If the bill is not passed, as is widely expected, sterling and UK financial assets will probably be unmoved since this is the expectation – the markets have priced it in.
“However, a significant loss for the government (say by over 40 votes), would lead to a further fall in sterling and negative sentiment towards UK stocks. Financial markets do not like political uncertainty.”
What time is Brexit vote?
The vote is due to take place tonight at 7pm, although amendments can be put forward before the main vote.
Each amendment can last around 15 minutes according to a spokesman for the House of Commons.
“There’s no time limit for the conclusion of the votes so the main vote could be some time later depending on the number of amendments selected,” said the spokesman.
Should her deal be rebuffed, Mrs May will be forced to return with a completely fresh plan, plunging the UK and its economy, into yet more uncertainty.
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