Sterling is set for some major volatility next week as U.K. lawmakers vote on the country’s planned departure from the European Union.
The British Pound could jump as much as 4 percent against all the other major currencies on Tuesday, according to a strategist at J.P. Morgan Asset Management said. The caveat for this upside is the unlikely approval of the Prime Minister Theresa May’s Withdrawal Agreement — the much-maligned 585-page document that outlines how the U.K. should leave the Union.
“The pound is down about 4 percent from that level (when the prime minister came back from Brussels with an agreement) so we will at least recover that on the deal passing,” Karen Ward, a chief market strategist at J.P. Morgan Asset Management, said Wednesday at an event in London.
But sterling could also lose more than 2 percent against the U.S. dollar if the deal is rejected, according to strategists at Nomura.
The British pound has seen some serious weakness since the country voted to leave the European Union in June of 2016. It initially dropped to a 31-year low immediately after the vote and throughout last year the currency lost 6 percent of its value against the greenback. On Friday morning it was trading at around $1.2727.
Jane Foley, the head of foreign exchange strategy at Rabobank, told CNBC via email that if the vote passed next week she would expect sterling-dollar to trade back in the 1.30 area. “On a failure I would expect to see 1.25,” she said.