Theresa May outlined her Brexit plan B to the House of Commons yesterday, following a crushing defeat last week on her original plan for the U.K. to withdraw from the European Union.
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Prime minister Theresa May now has a week to gain support for her alternative back up plan which needs to address 3 key areas in order for it to pass through parliament. In short; these are 1) including Parliament on her Government's talk with the European Union to increase the openness of negotiations, 2) protecting the rights of workers and 3) ensuring that there is no hard border on the Irish border backstop. Critics have already condemned Theresa May’s alternative as a carbon copy of her first plan, only time will tell if she can convince her peers and opposition that these changes are enough to secure a smooth transition away from the EU.
I would largely expect for the Pound to remain hypersensitive to any news regarding Brexit Plan B’s success or demise as we pass through the week. The Pound was trading marginally higher last night on news that the chances of a no deal Brexit when the UK leaves the EU on March 29th had been ruled out and the chances of a second referendum were too diminishing.
The polish PM also gave Theresa May hope and helped the Pound by proposing a 5-year temporary backstop on the Irish border that could unlock the current deadlock in negotiations.
This week could be an extremely volatile week for the Pound. I would largely expect sterling to continue to strengthen if Theresa May can now gather momentum from today and continue to work positively with the EU to resolve these issues before the second vote. I feel if she can’t then the possibility of a no deal Brexit and second referendum could start to become a reality for the U.K. and harmful for the Pound.
This morning, Jeremey Corbyn and his labour party have upped the pressure by backing a plan to force a second referendum.
Away from politics and there a two key releases for the pound today – the latest labour report and the public finances report. Although there is likely to be little movement with the primary focus on Brexit headlines for the Pound, a wise in wage growth for the fifth consecutive month could be seen as a sign of hope for the Pound and may provide further strength today.
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