The pound coudl be set for intense volatility on this historic day which will see a meaningful vote in parliament on whether to accept the latest Brexit withdrawal deal that was agreed late last night in Strasbourg.
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Prime Minister Theresa May has confirmed she has secured legally binding changes to the deal. A whole range of assurances have been agreed to include a joint interpreted instrument, a more ambitious political declaration and potentially a separate document from the UK side containing a British interpretation of what the legal text means.
European Commission President Jean Claude Juncker has stated that there will be no third chance to improve the deal. He added “There will be no further interpretation of the interpretations and no further assurance on the reassurances.”
Parliament will now scrutinise the detail of the deal with Attorney General Geoffrey Cox to make a statement which will hold considerable sway as will the legal team for the European Research Group, dubbed the ‘star chamber’. The views coming from the Democratic Unionist Party (DUP) will also be crucial. A delay for the vote may be necessary though to allow for more time to debate these last minute changes and another 24 hours may be necessary.
The pound has surged higher on the hope that a breakthrough is near with gains over 1% for GBP EUR. The gains have presented an excellent spike for those looking to move out of sterling.
To recap the last meaningful vote saw Theresa May’s deal heavily defeated by 230 votes in the House of Commons.
The reality is whether enough change on the Irish backstop has been made to convince MP’s to now vote for the deal. The vote is expected to be held at 7pm this evening and the outcome could result in considerable market reaction for sterling exchange rates.
If Theresa May is able to push the vote through then it is possible that there may be considerable gains for the pound. If however the vote does not pass then there may be a period of deep uncertainty for sterling exchange rates with a number of very different outcomes possible. MP’s would be given another vote to decide on whether to push forward with a no deal Brexit. Another vote would be held afterwards on whether to request a time limited extension to Article 50.
It has been reported that an amendment to support a delay to Brexit could result in a constitutional crisis which could lead the Government to lose its ability to govern. With such a range of political options still open the markets will be kept guessing with the pound on edge.
Manufacturing and Industrial production numbers are released this morning as well as trade balance numbers. Although the numbers are expected to read negative they will almost certainly be overshadowed by today’s far bigger political events. Clients with pending requirement would be wise to get in touch to plan around these events and consider all available contract options to help to the risk out of the volatile currency markets.
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