For clients that have upcoming currency transfers involving sterling, the ongoing Brexit saga is going to be the key driver for exchange rates. MPs will return to the commons on the 7th January to debate Theresa May’s Brexit plan. Last month this exercise started but only lasted two days as the Prime Minister realised that the debate was pointless as MPs from all different parties, including her own, had made it clear they would vote against her when she held the meaningful vote.
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The debate on the 7th is set to last the week and the meaningful vote is to be held the week after. The problem I foresee for the Prime Minister is that she has no further concessions from the EU, therefore I expect the debate to be very similar to the one that was held last month. However, the only difference this time is that the PM will not be able to cancel the vote the week after.
At present I can only see MPs voting her deal down, therefore the question is what next? Firstly, I am a strong believer that Theresa May has no ambition in taking the UK out of the EU with no deal and I believe she would resign before this happened. However, I expect Jeremey Corbyn will hammer the last nail into the coffin shortly after the vote when he calls a motion of no confidence in the Government. If this materialises all eyes will turn to the DUP and if they give support to the Conservatives.
With the DUP adamant that a deal needs to be struck to keep the good Friday agreement running, I expect they could pull the plug on the Conservatives which would then mean the Conservative party did not have a majority. Thereafter, parties will come together and have 2 weeks to try and team up to form a Government and if they all fail, which is likely as they all have a difference in opinion regarding what Brexit would look like, the British people would be back to the polls voting at the next General Election.
All in all, my personal view is that it’s not looking good for the Prime Minister and if she does not play her cards right in the upcoming weeks, she will lose her job and the pound will suffer.
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