Since the start of the week, the House of Lords have been discussing the white paper set out by UK Prime Minister Theresa May. Earlier this month MPs within the House of Commons accepted the proposed Bill with no amendments and if the House of Lords follow suit Theresa May can trigger Article50 of the Lisbon Treaty and start the process of leaving the EU towards the end of March. However Nicholas Macpherson former Secretary of the Treasury and Guy O’Donnell the former Whitehall cabinet Secretary have scrutinised May’s Brexit plan. They believe that the Bill should be amended, guaranteeing EU nationals rights in the UK.
There is a good chance the House of Lords will propose the amendments and therefore the Bill would then be sent back to the House of Commons to approve. Regardless of amendments I still believe Theresa May will begin the process of leaving at the end of March and therefore the spike we have seen in the pounds value over the last 7 days is temporary and worth taking advantage of.
This week discussions have taken place within Brussels, in a bid to outline how much the UK would have to pay the Euro for leaving. The reason why the UK have to pay a fine is because the UK signed up for certain programmes and projects and now they will be pulling out.
European Commission President Jean-Claude Juncker did not hold back with his comments on Tuesday and has described the potential fine as ‘hefty’ and that there would be no discount. At present reports are suggesting the UK would have to pay over £50bn to exit and this could be a factor to why the Pound fell throughout yesterday’s afternoon trading session.
Economic data for the UK has been a mixed bag and I personally believe the Bank of England could have a major problem on their hands in the months ahead. GDP numbers showed an improvement yesterday morning for the UK which is positive however the slowdown in wage growth last week coupled with rising inflation is the problem.
If the UK publics wage growth slows throughout the year due to Brexit however items become more expensive throughout the year due to rising inflation, the Bank of England have a decision to make. If they intervene and raise interest rates this would combat inflation however mortgages would become more expensive and therefore the UK public have less to spend.
Furthermore retail sales numbers, which have been a good performer for the last 12 months also dropped last week and could continue to dwindle if the prices of goods continue to rise. Furthermore it’s difficult to predict economic data in the weeks to come due to the UK being the first country to leave the European Union however I expect a slowdown is on the horizon.
Get in touch with your broker today if you have an upcoming foreign currency requirement, the Pound could face new challenges as we approach the Article 50 deadline. Call 01494 725353 or email me at email@example.com and Ill be happy to respond personally.
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