The pound enjoyed a strong end to the week on Friday as the immediate risks around Brexit had a delayed retreat after the postponement of the departure date. In the immediate aftermath of the announced delay, the market was disappointed by the length of delay, with a 6 month delay being less than the anticipated 12 month delay and sterling initially struggled. Whilst the removal of the imminent threat of a no-deal exit does give the pound some respite, there are also fears about months of political uncertainty in the UK.
Investors gave support to the pound on Friday as there were fresh reports surfacing that there could be parliamentary support for a new referendum. The most high-level political to echo this sentiment was the Chancellor, Philip Hammond, who suggested that the idea of second referendum would again be put to parliament, despite government opposition.
Due to the timeline of the delay, investors are unsure of immediate drivers for the pounds, and the drop in volatility expectations reflects this. One-month implied volatility has fallen to its lowest since January 2018, whilst three and six month measures are at similar lows. Until we are given fresh cues on the Brexit outcome, the next direction for Sterling is uncertain.