Speculation continues over the controversial Chequers deal and whether or not if the deal collapses it will cost Theresa May her position. More on the current position of Brexit negotiations and the ongoing impact on the Pound in today's Sterling report, with the table below showing the range of exchange rates for a number of currency pairings during trading hours on Monday, highlighting the importance of timing your transfer and the difference it can make to your return.
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We are due to trigger article 50 on 29th March next year. There is no obligation however to leave the EU with a deal in place. The UK would be forced to trade on the basis of principles set out by the World Trade Organisation.
A “no deal” scenario is a step into the unknown and whilst this scenario is still on the cards I feel there will be little investor confidence in the Pound which will remaining anchored against the majority of major currencies.
The current Chequers proposal will allow Brussels with a large say over British laws in exchange for access to the European markets.
The deal has many politicians up in arms and could lead to a leadership challenge which would no doubt cause further woes for the Pound.
Personally, I feel Theresa May will receive backing when she meets with the cabinet on Thursday. The stakes are simply too high to complicate matters at this late stage.
Ministers must realise that the PM is due to meet European leaders on 20th September in Salzberg.
It is expected that her proposal will receive a slightly warmer reception due to Germany publicly stating that they are willing to be more forthcoming with the UK’s offer.
There could however be trouble after this event at the Conservative conference in Birmingham next month. It is expected that Boris supporters will try to an engineer a revolt over against the current Chequers deal. We will then see a further European summit on 18th October. According to the official Brexit timetable this is when a firm deal should be agreed by both sides. This is expected not to be the case and there will be an emergency summit in November when hopefully a deal will be agreed. This is apparently the last time a deal can be struck.
The deal must then be approved by Westminster. With so many against the deal you may think it may not pass through, this may not be the case. 48 Tory MPs must activate a confidence notion. If this is achieved there will be no need to for her to resign. This at present seems the plausible outcome only if she failed to gain a majority would she have to step down.
If there was to be a vote of no confidence, Sterling could take a hammering due to the crucial negotiation period for Brexit.
I doubt any Tory would like to face the thought of a Corbyn led Government or the third general election in three years.
I am of the opinion that as talks intensify Sterling could suffer as both sides pull out all the stops to try and gain the best deal. If you have to move before the emergency summit in November, 13th November is being rumoured to be a potential date. I would be looking to take advantage of current levels to take the risk out of my trade.
Michel Barnier, chief negotiator for the EU did speak yesterday in Bled, Slovenia and said he thinks a deal can be reached in 6-8 weeks. We did see Sterling rally after this confident, but I take what he says with a pinch of salt considering less than a fortnight ago he said the UK would get a bespoke deal which saw Sterling spike before retracting along with Barnier's comments.
Average UK earnings figures are released this morning and this release has been known move the markets due to its relevance in interest rate changes. I wouldn’t expect too much movement due to current Stlering exchange rates currently being dictated by Brexit talks, still every pip counts so it may be worth keeping an eye on.
The Bank of England (BOE) Interest rate decision is due on Thursday. I would be very surprised to see any change. What could cause volatility is the press conference following the announcement when BOR Governor, Mark Carney could discuss monetary policy moving forward, this has been known to move markets in the past. Personally I expect a dovish tone due to lack of clarity surrounding Brexit. I would not be expecting a surge in the Pound’s value.
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