Following a week full of political drama in the UK, Sterling ended last week trading up against most major currencies, with the GBP/EUR pairing above 1.13 and the GBP/USD paring above 1.28.
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Sterling markets initially weakened during the build-up to the meaningful vote of Prime Minister Theresa May’s proposed Brexit plan in Parliament, but following the bruising defeat which saw the bill rejected by over 200 votes, Sterling quickly bounced back and saw continued gains throughout the rest of the week.
Many investors have put the increase in Sterling sentiment down to the recent animosity shown in Parliament to the potential of a ‘no-deal’ outcome, and following the current proposed deals rejection, there are arguments to suggest that this is now less likely.
In addition to this, there have been growing suggestions that the rejection of the Prime Minister’s plan has also increased the likelihood of a ‘no-Brexit’ outcome, but this has now opened the door to debate surrounding whether this would fundamentally go against the democratic result of the referendum in the first place.
Since there are less than 70 days left until the 29th of March exit date, an extension to article 50 is growing more likely, so it could be expected that Sterling currency markets will remain volatile until there is clarity surrounding when, or now whether the UK might separate from the EU and what the future arrangement might look like as a result.
Since the current proposed Brexit deal has been rejected and Theresa May’s conservative government will remain in power following success in the confidence motion last week, the Prime Minister will now stay true her words and try and renegotiate a deal with the EU, in order to try and pass her plan through Parliament once again.
When this might happen still remains to be seen, but over the weekend there appear to be developments surrounding the PM’s potential strategy to find a solution for the Irish Boarder – a key sticking point that has attracted controversy throughout the entire process.
Reports suggest that the PM will launch a fresh bid to secure support of her deal, by trying to bypass the EU and negotiate a bilateral agreement with Ireland to keep the boarder open after the March exit date and thus removing a need for a backstop.
The backstop has been insisted on by Brussels throughout the process, as a measure to ensure an open boarder is maintained in the event of a ‘no-deal’ outcome.
Since Brexit has been a key driver of Sterling currency markets, clients anticipating transfers involving the GBP can keep up to date with the latest developments by contacting their account manager here at Foreign Currency Direct.
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