Brexit continues to be the key driver for sterling value. This weekend saw May’s latest deal agreed by Brussels. The deal was accepted in just 38 minutes by all 27 member states.

Currency Pair% Change in 1 monthDifference on £200,000
Brexit Irish border

There was little movement on the markets however with the pound only making slight gains against the majority of major currencies.

The real test for deal is when it is voted on in parliament. With so many MPs openly disgruntled with the deal it may be no easy task. The vote is due to take place 11th December.

It is an interesting situation, as if the vote is not passed there is the strong possibility Theresa May will resign or be ousted from her position. Jacob Rees-Mogg recently called for a vote of no confidence and it is rumoured there are as many as 35 letters of no confidence submitted to the 1922 committee with 48 required for a leadership challenge.

Brussels have stated that the deal on the table is their best offer and no matter who is in charge the deal will not be changed.

If we do enter a “No Deal” scenario there is the strong chance that May will be ousted form her position or resign. The Tories must be aware of this when they make their decision on the vote as voting against the deal could result in Labour gaining power.

Book makers currently have the odds of the deal being passed at 50/50. I am of the opinion the deal will be passed, the consequences of a no deal are simply too severe.

I would not put all my eggs in one basket however, if I was selling sterling I would consider performing a tranche of my requirement at current levels before the parliamentary vote.

Bank Stress Tests and Financial Stability Report

Today will see the Bank Stress tests and the Financial Stability report. I would be surprised to see any of the large Banks fail the stress test and I am of the opinion this will not have any major influence on sterling levels. However, the Financial stability report could move the markets . The Financial Policy Committee assesses the outlook for the resilience and stability of the financial sector and if there are issues, they look at ways to resolve them. If there are any serious issues we could see the pound weaken.

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