The situation with Brexit took a temporary respite until Friday, when EU leaders could pass a verdict on allowing Britain to postpone the date of withdrawal from the alliance.
On Wednesday evening, the ambassadors of the 27 EU countries held the first informal discussion of postponing Brexit, but no official decision was made. At the same time, all participants of the meeting agreed on the need to postpone the exit of Misty Albion from the block in order to avoid the implementation of a "hard" scenario.
Previously, information appeared that the delay could be floating, that is, Brexit could take place earlier than the agreed date, if London and Brussels will be able to quickly ratify the agreement on its terms.
"Due to the fact that British Prime Minister Boris Johnson failed with his Brexit plan in the House of Commons, we can expect that part of the risk premium that has been eliminated over the past three weeks will be returned to the value of the country's assets. How much it hurts the pound depends on how long the EU will extend Brexit. In theory, the alliance can offer a two-stage extension," Bloomberg expert Ven Ram said.
According to him, the first extension can be granted for two weeks and will be conditional on the fact that B. Johnson's plan will become law, provided that all parliamentary barriers are removed.
In such a scenario, the pound could fall against the US dollar to $1.24–$1.25 and then jump sharply if there are signs that the United Kingdom will leave the EU with a deal.
"If B. Johnson fails to secure the approval of the deal by Parliament during the first extension period, the EU is likely to extend the validity of Article 50 of the Lisbon Agreement until January 31 to prevent the risk of the UK leaving the bloc without a deal," V. Ram believes.
He predicts that in this case, the pound risks falling to $1.22–$1.23 because such a scenario opens up a combination of probabilities with many different variations. In particular, a longer extension of Brexit implies the possibility of early parliamentary elections in the United Kingdom before Christmas.
"Recent opinion polls have shown that the conservatives could win a majority in Parliament, which would ultimately ensure the exit of Albion from the EU and open the door for the growth of the pound. However, voters' intentions may change ahead of the election. Labor victory would mean great uncertainty, as they tend to push for a second referendum on whether Britain should really leave the EU. Until the cloud of uncertainty around Brexit disperses, expect the pound to weaken," Ram said.