The peers within the House of Lords yesterday voted for an amendment to the EU Withdrawal Bill which would oblige the UK to stay within the European Economic Area. The amendment won the vote 245 – 218 votes in the House of Lords and will now return to the House of Commons.
It is worth noting that neither the Conservatives or the Labour parties back the change that would essentially mean the UK is replicating the “Norway Model”.
Government Ministers along with the Prime Minister are still pushing for the UK to leave the single market however remaining with a customs union. Under the Norway model the UK would remain in the single market however would be subject to EU Laws but would have no say in how they are created.
From the perspective of Sterling this vote could have quite a positive outcome for Sterling as businesses will have less uncertainty if any existing agreements with the European Union were to be continued.
It does seem unlikely that the House of Lords changes will be upheld, however if MP’s in the Commons were to uphold the amendment we could see a vote of no confidence for Theresa May’s government.
What does seem clear is that the EU Withdrawal Bill could keep going back and forth between the two Houses and until there is a definitive vote or agreement Sterling is unlikely to see any major gains.
The below table shows the market movements for a number of GBP currency pairings in the last week:
|Currency Pair||% Change||Difference on £200,000|
The Bank of England will deliver their latest interest rate decision today at 11am with market movements on the cards. Only three weeks ago there was an 85% chance of a rate hike today, however that is now thought to be below 20%. All eyes after the decision will turn to Bank of England President Mark Carney who will deliver a speech at 12.30pm.
The markets will be waiting to hear if Carney envisages at least one rate hike this year which should provide some encouragement for Sterling. However, Carney has a reputation for limiting Sterling’s prospects and any hint towards the Central Bank holding off a hike in 2018 could drive Sterling down across the board.
Depending on your appetite towards risk trading on the back of Sterling’s rally yesterday afternoon before the rate hike takes place this morning may be sensible.
Furthermore, the Bank of England are also expected to release the latest Quarterly Inflation Report which at the moment is one of the main focuses as to whether or not a rate hike could happen this year.
Make sure you’re in touch with your account manager in order to capitalise on any movements in your favour.
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