The pound made some interesting gains last week and held these for the most part over the weekend, despite UK Prime Minister Theresa May confirming that the second vote on her Brexit deal was to be delayed.
Whilst she did commit to a revised date, she confirmed that MP’s would be able to have a final vote by the 12th March.
She also stressed the positive nature of the ongoing talks with the EU, despite Brussels claiming last week that the current deal was final and non-negotiable.
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Her positive spin on the announcement may well have helped sterling to hold its current position but with time fast running out to push any revised deal through Parliament, it is likely that MP’s will only have one more chance to approve a final Brexit deal before the March 29th deadline.
The pound made gains against the majority of its major currency counterparts last week, with GBP/EUR rates moving back above 1.15, whilst GBP/USD rates also moved back above the key resistance level of 1.30. There was also an improvement against the commodity-based currencies, with GBP/AUD rates moving back towards their recent highs and comfortably above 1.80.
We are clearly entering a defining period for the UK and their future standing outside of the EU bloc but as of right now, we are no closer to understanding how the UK plans to leave and whether or not a deal will be in place when we finally do.
There is one school of thought which indicates that UK Prime Minister Theresa May has lost all control of proceedings and has little or no chance of convincing her fellow MP’s to vote through her Brexit deal, ahead of the impending deadline next month.
There are now reports surfacing that she will request an extension, possibly of three months, whilst she tries to convince her fellow MP’s to vote her Brexit deal through, in whatever form this will ultimately take. This scenario would likely keep the pound in limbo during any extension period, with any sustainable gains unlikely until the outcome became clearer.
There is another school of thought however, one that views the current standoff as a little more than a guise and that Theresa May and head of the European Commission Jean-Claude Junker are plotting together. If this is to be believed then they plan to push through the PM’s current deal by driving the fear of no-deal Brexit, with UK MP’s widely viewing this as the worst of all outcomes.
How this scenario will play out would much depend on whether or not the EU would make any concessions on the much-maligned Irish backstop, which seems to be the final sticking point and most disputed part of May’s current withdrawal agreement. If they did then you argue that the pound would see its value rise, as confidence returned to the market after months of stagnation.
There were also reports over the weekend that the option of a second referendum was gathering pace, with senior Labour back benchers apparently ready to walk away, should Labour leader Jeremy Corbyn not back an amendment proposing a second referendum on Mrs May’s deal.
What is clear is that with so many potential outcomes, senior political figures jostling for power and a clear lack of direction in terms of how the final outcome will be reached, investors must still be looking at the current mess very unfavourably, which in turn is unlikely to help support any major upturn for sterling from its current levels.