The pound was trading flat on Tuesday morning as currency traders brace for the crunch Parliamentary vote on Theresa May’s Brexit deal.
Sterling was down marginally versus the US dollar at 1.286 and up 0.2% against the euro at 1.123.
It comes as the Government faces near certain defeat in Parliament, with MPs set to emphatically reject the EU Withdrawal Agreement by a hefty margin.
Mrs May could face a defeat of historic proportions, raising the prospect of a no-deal Brexit or the departure not happening at all.
Neil Wilson, chief market analyst at Markets.com, said that whatever the outcome, traders should expect “considerable volatility” as news flow from Westminster dictates price action.
He added: “The question is whether the imminent disorder is fully priced – it seems unlikely that the market really reflects where we are about to go on Brexit, albeit the lie of the land is more favourable for pound bulls longer term, i.e. a higher chance of a no-Brexit or very soft Brexit.
“Extension of Article 50 seems likely if this deal fails and Jeremy Corbyn manages to force an election. But similarly, the no-deal risks rise by the day with March 29 just a couple of months away. As previously argued, the either of the extremes is still the most likely outcome.”
Number crunchers at ING have outlined a series of scenarios for the pound following the vote.
In the unlikely event that Mrs May’s deal passes, sterling will rally to 1.38 US dollars, according to the bank.
If a general election is called, which is also unlikely, the pound would plummet to 1.20 US dollars and if a Norway-type arrangement is agreed, it would rise to 1.35 US dollars.
A second referendum would see the British currency jump to 1.40 US dollars.
However, all three latter scenarios require an extension of Article 50.
If a no deal hard Brexit comes to pass, then ING reckons sterling would tank to 1.12 US dollars and hit parity with the euro.