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Pound slumps as May's Brexit deal suffers latest defeat

The pound slumped on news of Geoffrey Cox's legal advice.

What a difference 24 hours makes

This time on Monday investors were buying the pound, sterling was strengthening and had momentum - the markets seemed to believe that the prime minister had managed to secure a revised deal that addressed the headache of the “backstop” and might actually clear the Commons.

At 8am on Tuesday £1 was worth $1.32. That's when Jon Snow - the Channel 4 presenter - tweeted that the he'd heard the Attorney General, Geoffrey Cox, had indicated there remained a risk that Britain would find itself stuck in an eternal customs union with the EU.

Cox responded. "Bollocks," he tweeted. As it turned out, it wasn't. At 11am when Cox published his legal advice the pound fell a cent against the dollar in a matter of seconds.

On Tuesday evening it rose and then fell again as the prime minister suffered a second hefty defeat.

So what happens next?

Investors aren't pricing in a second referendum, they aren't betting that Britain will remain in the EU.

On Tuesday, Ross Walker an economist with RBS old me "the most likely outcome is a Soft Brexit, somewhere between membership of a customs union and a Norway style deal".

March 29 is almost upon us, in a sense it's remarkable that markets aren't in meltdown.

If MPs vote in favour of No Deal tomorrow there will be panic but you won't find anyone anywhere who believes that’s likely to happen.

Partly because the PM has made it a free vote, partly because the Chancellor is due to deliver his Spring Statement tomorrow lunchtime and he's expected to spell out what disaster No Deal would be for the economy and public finances.

No Deal remains the default position and therefore a possibility. The markets assess the odds as being so low it can almost be dismissed. The problem is that the markets don’t always get it right.