Why Brexit influences negatively to GBP and supporting EUR

The UK parliament is expected to vote on Theresa May’s Brexit plan late in the UK afternoon.

Currently analysts predict that the plan will most probably be rejected, as no majority seems to exist to support it.

If the plan is rejected by the UK parliament, implications could be severe for the UK political stage as a resignation of the government, a disorderly exit from the EU or even the entire Brexit process being revoked, are all possible.

Should Theresa May lose by a wide margin we could see the pound weakening substantially as uncertainty could grow for the GBP.

Many UK politicians seem to be eyeing already the next phase of the Brexit process.

The Labour party seems to be targeting a general election or a possible new referendum about Brexit in case general elections are not possible.

If any UK politician unexpectedly switch sides until or during the voting, further confusion and enhanced volatility could occur.

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The ECB monetary policy is announced today at 12:45 GMT and will be followed by ECB president Draghi’s press conference at 13:30 GMT.

These two events are the main events for today’s European trading session.

Draghi is expected to downgrade the economic assessment while continuing the monetary policy settings, with interest rates expected to remain at their current levels until after this summer, this is due to developments in the euro area since the ECB’s December forecasts suggest a pivot to the downside.

The fact that the slowdown in the Eurozone is stronger than expected, and with interest rates expected to remain unchanged, the key focus will be on the ECB President Mario Draghi’s comments in the post-meeting press conference.

The Euro is likely to witness some aggressive selling if Draghi points towards a potentially longer lasting slowdown, or with suggestions to keeping monetary policy in place for an prolonged period of time.

Should this be the case, the euro vs dollar will naturally come under pressure, especially as the mini-recovery in recent weeks seems to have lacked substance and which have kept dollar Bulls on stand-by, ready to take advantage.

Traders can expect to see EUR/USD market volatility, especially during the press conference should comments imply a change in monetary policy or its outlook.

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