The British pound sold off more than 0.6% in early trading on Sunday evening - falling from its Friday close of 1.29739 to 1.28765 in the space of two hours - following the historic vote in Parliament on Saturday that saw Boris Johnson's new Brexit withdrawal agreement delayed once again.
Although the pound soared more than 7% over the past two weeks against the dollar, closing at a 6-month high last Friday as traders speculated on a favorable outcome on Saturday, the sell-off on Sunday indicates that sentiment among FX market participants has shifted considerably in the aftermath of the vote.
Additional delays and added uncertainty should now weigh on the pound in the coming weeks, although analysts at Goldman Sachs maintain the pound is set to rally once more as the withdrawal agreement has only been delayed, not canceled:
"We think ‘no deal’ risks have diminished as a result of the extension request, and at this week’s open, we expect any initial fall in GBP as a result of disappointment that the deal has not passed this weekend to fade as the deal has been deferred, not denied. As a result, any fall in GBPUSD this evening will be limited to 1.27-1.28, which should be bought."
Image credit: 1
