Yesterday, talks between the Government and Labour continued in London in a bid to break the deadlock in the Brexit negotiations. Labour last night admitted that they are seeking to ‘pin down’ exactly what the Government are prepared to change. Reports are suggesting that both parties will try and come to a compromise in regards to a customs union this week.
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My personal view is that the Prime Minister will not be prepared to cut any of her red lines and consequently remain in any form of customs union. Therefore, towards the back end of this week I wouldn’t be surprised if she announces that MPs will be given a further vote on what to do next. If this occurs, the uncertainty could put further pressure on sterling.
So far the Conservative Party have not started their European election campaigns as they believe there is still time for Parliament to approve a withdrawal agreement. With the UK set to elect MEPs by the 23rd May, this strategy could be a risky one for the Conservatives. Instead the Conservative party have targeted the local elections and the votes taking place on Thursday evening could give a good indication of how the Conservatives will perform at the next election.
Many media stations are reporting that the UK public feel frustrated with the Government due to the handling of the Brexit negotiations.
If the Conservatives end up losing 100s of seats to Labour, the markets may start to price in that there will be a change at the next General election and the pound could suffer.
On Thursday the Bank of England will release their latest interest rate decision. Markets are anticipating all of the members of the Bank of England will vote in favour of keeping interest rates on hold. Therefore, it will be the inflation report alongside Governor Mark Carney’s speech shortly after that will be the main talking point. Personally I expect the Governor may continue to hint that Brexit uncertainty is a reason why the Bank of England are keeping interest rates on hold at 0.75% and the Central Bank will react when decisions are made by the Government. If you are new reader and are converting pounds for the first time, Mark Carney’s speeches are known to create volatility, therefore if you are buying or selling pounds this week and would like to talk about the interest rate decision and how this may impact your currency exchange feel free to contact the trading floor.
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