Yesterday, the House of Commons resumed after the Christmas break and it seems to be a new year but with the same problem, Brexit. MPs have a lot to debate regarding the Brexit withdrawal bill by the deadline in 23 days’ time. MPs will now need to scrutinise what legislation will be needed in order to implement Boris Johnson’s Brexit Deal.
The bill has now moved on to the next phase of processes, which is known as the committee stage of the agreement, where the bill will be scrutinised in detail over the next couple of days before moving on to the House of Lords.
Yesterday, MPs debated the 11-month transitional period in which the UK will leave the EU. During this time, both the UK and the EU will negotiate their future relationship. Boris Johnson believes this is long enough to negotiate a free trade deal and the UK can leave the EU by the end of 2020. Mr Johnson has once again committed to this time frame with his famous “do or die” attitude and has ruled out the option for an extension period, even if a free trade deal has not been agreed.
This afternoon MPs will return the Brexit bill and topics will include the Northern Ireland separation issues, financial provisions and what EU law will be retained at the end of the implementation period. Historically any news headlines highlighting progress to a Brexit deal is viewed as positive however sterling is still sensitive, and any negative headlines could put pressure on the pound.
Yesterday Spanish Socialists won MPs backing for a left-wing coalition government by just two votes. The vote has ended almost a year of political gridlock but as expected the vote was very close with 167 votes in favour of the coalition and 165 against. Pedro Sanchez acting prime minister won largely thanks to 18 abstentions. This will be Spain’s first coalition since democracy was restored in 1978. Mr Sanchez now plans to hold his cabinet meeting this Friday and believes this was the only option for Spain after 5 elections in recent years. Mr Sanchez has warned “this is either a progressive coalition, or more deadlock for Spain”.
Meanwhile Germanys car production fell to its lowest level in 23 years as Europe’s largest economy suffers from the fall out of global trade. It looks like the industry is set to experience a bumpy ride this year with the VDA (Varanasi Development Authority) predicting global deliveries will drop to 78.9 million vehicles from 80.1 million in 2019. During this period, the industry will also have to spend billions to develop cleaner, eco friendly vehicles. Given that Germany is the EU’s largest economy a sharp decline in Manufacturing figures could put pressure on the euro.
Yesterday the USD appeared to be on the back foot once again, rates dipped towards 1.3100 and oil fell from a three-month high as traders waited to see whether the clash between the US and Iran would lead to a disruption of oil supplies from the Middle East. Tensions are still simmering between the US and Iran after the US killing of Iranian General Qassam Soleimani. Iran said they are evaluating 13 possible scenarios of retaliation against the US. Senator Rand Paul said, “attacks on the US are far more likely after the killing of Soleimani”.
Due to political Uncertainty safe-haven currencies are in high demand which is why we have seen the USD strengthen even though so much uncertainty surrounds the US. The Japanese Yen which is known for being one of the world’s leading safe-haven currencies was seen in its best position against the USD in over three months, however it did appear to lose ground throughout the day. The swiss franc was also up over 0.5% and was noted to be at its best performing position in over a year.
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