Theresa May will be in Brussels today to meet with the President of the European Commission Jean Claude Juncker, to discuss her Brexit plans. This meeting will take place at 16.30 and it will be the first meeting since May announced that her plan had been agreed in text with her EU counterparts last week.
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A lot has happened since then both politically and for sterling, with the pound having one of its most volatile weeks of trading this year after the initial gain was short-lived. Sterling soon begun to drop as reports of Government resignations hit the headlines.
There had been concerns that the pound would continue to fall and Theresa May’s position as Prime Minister would be called into question. So far this hasn’t materialised and the original target (outlined by Jacob Rees-Mogg who spearheads the European Research group) of 48 letters of no-confidence being submitted by Conservative MP’s by Tuesday hasn’t been reached, with only 26 letters being received so far according to reports.
I don’t think this issue is over though, and those with a sterling currency requirement should pay close attention as if there are further votes of no confidence and the amount gets closer to 48, we could see a sterling sell-off. This would be especially influencial this far into the Brexit process with the departure date now just over 4 months away. The Brexiteers have voiced their disapproval at the deal and the previous Brexit Secretary, Dominic Raab stepped down as a result of the plan. Interestingly Raab was brought in to replace David Davis who also wasn’t happy with the conditions of Brexit, which goes to show how torn the Government is over the Brexit plan. If you wish to be updated to any spikes in the value of GBP exchange rates, do feel free to get in touch.
Yesterday the Governor of the Bank of England Mark Carney spoke for the first time since May’s UK-EU Brexit text agreement was announced. I would imagine that Theresa May was happy with the outcome. Although yesterday’s focus was on the November Inflation Report, Carney did state that May’s Brexit deal would support the UK economy and emphasised the importance of a transitional deal, as the UK leaves the EU. He said that the EU withdrawal agreement would ‘support economic outcomes’ and the pound strengthened after these comments. Another member of the BoE, Andy Haldane also suggested that fears of a no deal Brexit are impacting the UK economy. Monetary Policy Committee member Michael Saunders also implied that businesses are not prepared for a no-deal Brexit.
Mark Carney has said that the BoE will release its Brexit scenarios sometime next week, which will cover expected monetary policy changes in the event of a deal, or no-deal Brexit. The uncertainty of late has left markets not expecting another rate hike until 2020, although a short-term jump in inflation levels could alter this, so depending on what’s contained within this report next week we could see market movement.
There are no major economic data releases due out of the UK this week, but I think how the meeting goes today could determine whether the EU Summit this weekend goes ahead. If it’s cancelled due to last minute issues between the UK and EU, I think we could also see the pound’s value drop so do feel free to get in touch if you wish to plan around these events.
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