Sterling’s value declined sharply during Wednesday’s trading, as the on-going Brexit saga took yet another twist.
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What was already a tense situation was further exasperated, as reports throughout the day confirmed just how divided the UK Government remains over the current Brexit strategy.
With time fast running out to find a viable solution, investors were quick to react to the developments, and the pound saw its value diminish throughout much of yesterday’s trading.
UK prime Minister Theresa May addressed the nation last night and made one final plea to her fellow MP’s to support her Brexit deal, ahead of what is likely to be a third and final Meaningful vote on the current deal.
The PM confirmed that she had written to President of the European Council Donald Tusk requesting an extension to Article 50, which would extend the current negotiation deadline from March 29th until June 30th.
She also made it clear that she would not approve a long-term extension to Article 50, with the markets immediately questioning whether this meant she would step down from her position as PM, should MP’s reject her deal and vote for an extended period of negotiations.
Whilst addressing MP’s in the House of Commons earlier in the day, the PM also stated that if her Brexit deal was rejected for a third time, then “this House will have to decide how to proceed”.
GBP did not fare well following these developments, with a sharp sell-off of GBP positions causing the pound's value to drop against every majorly traded currency. GBPEUR interbank rates fell back towards 1.15 last night, whilst the pound’s recent resistance against the USD also evaporated, as Cable interbank rates fell back below 1.32.
Theresa May was clear in her message last night and that was to point the finger of blame at her fellow MP’s, a strategy that may not ensue the required upturn of support she needs to push through her Brexit deal.
Sceptics of the PM immediately came out in voice, stating all she was doing was trying to squeeze one side of the house with the threat of no-deal and the other side with the threat of no Brexit at all.
The drama did not end there however, as Donald Tusk responded to the proposed extension of Article 50. Whilst the official line from Brussels indicated that the PM’s request had come too late in the day for a decision to be made at tomorrow’s EU summit, he did state that whilst it was possible it would likely only be granted if UK Parliament approved the current Brexit deal.
In truth, it was a chastising day for all involved and has once again left the markets with more questions than answers.
Today’s EU summit is likely to bring with it further developments, as Theresa May will desperately seek some type of support from the EU, to help her convince Parliament that the current deal is not only the right one, but the only one that is viable and available.
Whether she can finally persuade her fellow MP’s to vote in her favour is certainly debatable and is likely to be heavily impacted by whether or not the current talks with the Democratic Unionist Party (DUP) and Tory Brexiters who voted against the current deal bears fruit.
Whilst much of investors focus will be on the EU summit, a close eye will be kept on Bank of England (BoE) Governor Mark Carney’s address, following today’s interest rate decision by the Central Bank.
Whilst interest rates are likely to be kept on hold, Carney’s subsequent press conference and any comments by the staunch remainer, could likely impact sterling’s value before the close of European trading this afternoon.
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