INSIGHTS

Duncan Donald

Tue, Mar 12


Brexit Update: 12.03.19

This evening we had the Parliamentary vote on UK PM Theresa May’s current Brexit deal, and despite the optimism shown at the close of Mondays trading session after her meeting with the EU in Strasbourg, it has very quickly been proven that the improvements were a smokescreen and the “backstop” remains just that.  With little cohesive progression seen in her deal, it was voted down by 242 votes in favour versus 391 against.

In a day of enormous volatility for the Pound, having scaled the heights of 1.3300 versus the US Dollar, before returning towards the 1.3000 level the announcement of the vote brought the pound back up to the near 1.3150, before a slight pullback. The initial optimism came as perception that the vote decreases the potential of the UK departing the EU immediately or perhaps, even at all.  However, consideration must be given to what now is in store for the UK and in particular the Prime Minister, there is no question, the repeated defeat on the deal’s she has negotiated has compromised her tenure, to a level that may be irrecoverable. Her credibility in the UK is at a low and it is no surprise her apparent loss of the House of Commons leads to questions over her continuous leadership, with Citibank already sighting the possibility of a UK snap election.

 

GBP/USD H1 Chart

So what next for the UK?  Tomorrow we will see the House of Commons vote on leaving the EU with “No-Deal”, with the polls forecasting this unlikely a “no” vote, which would lead to a further vote on Thursday on voting on an extension to Article 50. Despite the fact in the PM’s address to Parliament, she alluded to the fact that the EU were not obliged to offer the UK the extension, in probability this would be likely to be granted, with the hope that common ground could once again be found between the UK and the EU. The heightened possibility of a delay to Brexit could support the pound, but the political uncertainty of the current leadership, will of course be a dragging factor in any resurgence.

 


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