Yesterday was a fascinating day for sterling exchange rates as all currency pairings involving sterling faced major market volatility. The day started with investors waiting eagerly to find out whether the Prime Minister would get the backing from the Cabinet in regards to her draft Brexit plan. Early reports suggested that the meeting would last an hour or two, however after a marathon 5 hours of negotiation, UK Prime Minister Theresa May appeared in front of number 10 to give a statement. The PM told the press that there had been a majority decision to back the draft proposal, and this was a decisive step towards sealing an agreement. Currency fluctuations were limited off the back of the announcement as the UK is one step closer to securing a deal, however investors are second guessing that further problems are on the horizon for the PM.
|Currency Pair||% Change in 30 days||Difference on £200,000|
The PM chose her words carefully yesterday evening when she stated the draft had been backed by the majority of the Cabinet, as shortly after reports emerged that 10 Cabinet members completely opposed the agreement and rumours emerged on mainstream media stations such as sky news and the BBC that Cabinet members are debating on whether to resign. Furthermore the PM should also be concerned about backbenchers within her Conservative Party, as speculation grew throughout the evening and this morning that more MPs were filing letters of no confidence, and according to the BBC, senior Conservative officials went one step further and said a vote of no confidence could come as early as today.
The problem the Prime Minister has is that she has to try to keep Brexiteers and Remainers happy. On one hand she continues to respect the result of the referendum decision and pushes forward to take the UK out of the EU, but on the other the UK has agreed to remain part of a customs union, if a trade deal isn’t reached within the transitional period. This agreement has been labelled ‘the backstop’. In addition, we learnt last night that the PM made another concession just recently in that the UK will not be able to choose when they leave the backstop, and the UK alongside the European Court of Justice would both have to agree to terminate the agreement. For Remainers and Leavers this just does not work.
Leavers want to leave the customs union so the UK can try to form trade agreements around the world with leading nations such as the US, and Remainers want to remain part of the customs union and single market in full, which would allow the UK to continue to be involved in passing new laws.
Theresa May is going to address Parliament today and will face tricky questions from both the opposition and her own Party. It will be interesting to see the DUP's reaction as initial commentary coming from the Party is that they won’t be able to support the PM moving forward.
Throughout the next couple of days she will be waiting to see if a vote of no confidence or resignations from her Cabinet ministers materialise. If she manages to get through the next week unscathed all eyes will turn to the EU to confirm whether the 27 member states approve the 500 page document, as the member states still need to scrutinise the proposal. If the EU sign off on the proposal there will be a vote in Parliament in December. If MPs sign off on the deal, the final withdrawal agreement will be put back to the EU to sign off and the UK will start the transition period in March 2019. However, if Parliament fail to approve Theresa May’s plan, and the commentary we have received over the last 24 hours seems like this is extremely likely, the UK will have 1 of 4 options. Leave with no deal, renegotiate, a general election or another referendum.
Clients buying sterling should be aware that we are one step closer to agreeing a deal with the EU, and that's why current levels for buying euros are at a 5 month high. However, if resignations from the Cabinet are received in the upcoming days, if there is a vote of no confidence or Parliament vote down the deal in the upcoming weeks, you would expect the pound to face major pressure. At present this seems extremely likely.
First rate service from Dayle Littlejohn in dealing with our transaction from Cyprus. He kept us updated at all times and we appreciated his sincere manner.
First class foreign currency provider, great rates and outstanding customer service.
Great service very professional but with a personal touch. Everything went smoothly with no fuss. Would highly recommend.