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3-1 Odds Pound hits Parity vs. Euro in 2019

Pound and Euro fall to parity odds

Image © European Union 2018 - European Parliament, Reproduced Under CC Licensing.

- Bookies quote odds for GBP/EUR parity at 3/1

- UK government denies requesting extension of Article 50

- Pound-to-Euro rate @ 1.1150, Pound-to-Dollar rate @ 1.2770

The British Pound has a good chance of plummeting to all-time lows against the Euro in 2019 according to betting markets, with one now quoting odds of 3/1 that GBP/EUR will decline to the landmark 1:1 exchange rate. 

Such a fall would likely be triggered were the UK to exit the European Union without a deal on March 29, an outcome that could cause significant shifts in the structure of the UK economy.

According to Robert Howard with the Thomson Reuters currency desk, Paddy Power quotes 3/1 for EUR/GBP to trade at 1.00 at any point in 2019.

"A no-deal Brexit could spur a jump to that landmark level," says Howard.

The GBP/EUR exchange rate has never fallen to parity, instead the low is located at ~1.02, a level reached as global markets were crashing in the financial crisis of 2008.

The exchange rate has been a slow as 1.0630 in the wake of the UK's decision to exit the European Union, the level was reached during the Sterling flash-crash of October 2016.

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UK Won't Extend Article 50: UK Government

The UK government has denied reports it is looking to extend Article 50 should no Brexit deal be in place by the March 29 deadline.

With the UK government facing defeat in parliament next week on the passing of the EU-UK Brexit deal, commentators and Remain-leaning lawmakers have argued the extension of Article 50 is inevitable.

However, UK Brexit Secretary Stephen Barclay has said his department are not testing the waters on the possibility of extending Article 50. Barclay was asked to deny a Telegraph report that suggested UK representatives in Brussels were "putting out feelers" on being granted an extension to Article 50.

According to the Telegraph, three separate EU sources confirmed that UK officials had been “putting out feelers” and “testing the waters” on an Article 50 extension, even as the Government said it had no intention of asking to extend the negotiating period.

Article 50 of the Lisbon treaty is the process that governs the exit of an EU member state from the Union, it is legislated to last no longer than two years. Only the European Council can agree to any extension.

Any delay to the exit process would mean an exit from the EU without a deal is avoided but it would only entrench the ongoing sideways moves in the main Pound Sterling exchange rates. However, Neil Jones, a trader at Mizuho, says headlines regarding delays to Article 50 could start to become increasingly important for the Pound.

"Price action is starting to suggest a higher Pound on a delay headline & lower Pound on a no delay headline.  Pushing back A50 does indeed buy time for renegotiation & even a possible referendum.  Easier said than done but a 2nd referendum would be heavily bullish for the Pound," says Jones.

Junior Brexit minister Martin Callanan has meanwhile told reporters in Brussels the Article 50 process won't be extended.

"We're all focused in the government on winning parliamentary support in the vote that's coming up next week," Callanan told reporters before a meeting of EU ministers in Brussels.

"We're very clear, the policy of the government is that Article 50 will not be extended. We are leaving the EU on the 29th of March this year. That's what Article 50 says, that's what parliament voted for and that's what domestic British legislation says as well," says Callanan, ahead of a meeting with fellow EU foreign ministers.

France's Europe Minister Édouard Philippe has meanwhile confirmed Prime Minister Theresa May has not spoken on the issue of extending Article 50 with French President Emmanuel Macron.

 

Remain-Favouring MPs Gear up to Frustrate 'No Deal' Brexit via Key Finance Bill Vote

Today, MPs will vote on a cross-party amendment to the finance bill (the legislation for the government’s budget), in an attempt at frustrating plans for a 'no-deal' Brexit to take place in March.

The amendment would prevent the government from making tax changes without the consent of parliament in the event of a 'no deal Brexit'.

"If the amendment passes (it has a decent chance of doing so), it would be a strong suggestion that a majority of MPs are against the UK leaving the EU without a deal, and another small step in MPs taking control of the Brexit process," says Kathrin Goretzki, a foreign exchange strategist with UniCredit.

Conservative MP Nicky Morgan and Labour's Yvette Cooper have tabled an amendment to the Finance Bill which would limit the government's spending powers in the event of the UK leaving the European Union without a deal.

It has the support of Conservatives Sir Oliver Letwin, Nick Boles and Sarah Wollaston - as well as Hilary Benn, the Labour chairman of the Brexit select committee.

Commentators suggest the amendments could deprive the government of cash required to execute a 'no deal' Brexit and create a U.S-style government shutdown.

Labour's Cooper says with the Brexit deadline looming now is not the time for political brinkmanship, yet we find this comment ironic considering what Cooper herself is trying to achieve through via the ammendment she is sponsoring.

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