Not Even The Bookies Have Any Idea How Tomorrow's Critical Brexit Vote Will Play Out

Now that a Brexit deal has been agreed between the UK and EU, all attention turns to tomorrow’s U.K. Parliamentary vote which, as Deutsche Bank's Jim Reid writes, "is a monumental occasion for the U.K. and Europe." Or maybe not that "monumental", because as Reid adds, "the reason we think that tomorrow’s vote is less important to the pound than the striking of the deal itself is that all the major UK parties now support either a second referendum which is unlikely to have no deal on the ballot paper (Liberal Democrats, Labour, SNP), or a concrete deal with the EU (Conservatives)."

That said, the market's initial euphoria following the deal headlines which sent cable as high as 1.30 evaporated quickly as the DUP negative stance quickly became apparent and made the parliamentary math for tomorrow’s vote a lot more difficult. As Reid explains, "most respected sources I’ve seen over the last 12 hours suggest Mr Johnson will be 0-20 short with momentum slightly going in his favour as time progresses."

To demonstrate just how confused everyone is over tomorrow's vote outcome, online bookie Ladbrokes is now offering even odds on the vote outcome.

In light of this confusion, DB says that BoJo "still might have a few rabbits up his sleeve to win friends and foes (workers rights?) over but it’s going to need a Herculean effort to get it over the line. As we said last week, the best case scenario for Mr Johnson is that the EU say it’s this deal or no deal. This would mean that those most opposed to no deal would essentially be voting for such an outcome if they rejected the deal tomorrow. A big irony. However I suspect the EU won’t want to take this hard line option. I suspect they’ll keep it vague about whether they’ll grant an extension or not before the vote to try to encourage the swing voters to back the agreement out of fear they won’t extend. But nothing beyond that."

One other option is that there "could also be an amendment voted on that ensures that if the deal fails, the Benn Act is watertight. This might encourage a few of the Tories who recently lost the whip to vote in favor."

In any case, "the big question is if the deal is not ratified tomorrow, what happens next?" Reid lays out the possible outcomes:

A general election in November appears most likely especially as well sourced journalists suggested yesterday that those desperate for a second referendum have decided not to try to amend the bill tomorrow to attach one. This might suggest they don’t have the votes for it.

The PM could request an extension to A50 from the EU and table a motion under the Fixed Term Parliament Act to hold an election in November. If opposition parties refused to vote for an election, he could resign and instruct his cabinet to do the same. The political pressure to hold such an election would be high, as a caretaker government formed under these circumstances would be seen as politically illegitimate.

It’s also worth noting that the Conservatives have polled better since Johnson became PM, and a snap ComRes poll last night shows that the public supports the deal by a 40% to 31% margin, with 29% of respondents unsure. The initial public reaction to ex-PM May’s deal was relatively negative. Importantly, only one scenario would reintroduce the risk of a no deal Brexit – that of the Conservatives forming a minority government with the support of the Brexit Party/DUP. What will therefore be interesting is the opinion polls over the next few days if he loses the vote. Will Johnson be blamed for not leaving on October 31st and see support leaking to the Brexit Party?

Throwing a last minute wrench into the calculations, moments ago French President Emmanuel Macron said the U.K. should not get another extension to the Brexit process if Prime Minister Boris Johnson loses a vote on the withdrawal deal in Parliament Saturday.

"I don’t think a new extension should be granted," Macron said at a press conference after a summit of EU leaders in Brussels.

As Bloomberg makes clear, Macron’s stance increases the risk that the U.K. will crash out of the European Union without a deal on Oct. 31. But it also increases the pressure on U.K. lawmakers who are unsure of whether they should back the plan Johnson agreed with EU leaders on Thursday.

Bottom line: traders can give up hopes for another peaceful weekend and expect plenty of headlines over the next 24/48 hours.