Theresa May has insisted that the UK can leave the European Union with a good deal but as we have seen over the last few days this appears to be a long way off at the moment. After rejecting the deal on Tuesday night by a total of 149 votes agreeing a deal appears to be a long way off.
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Last night the House of Commons confirmed that they will be voting against a no deal Brexit and this leaves the UK with little choice but to extend Article 50. MPs will now have to vote later on today to decide whether to ask the EU for permission to delay Brexit after the proposed date of 29th March.
At this moment in time there is a real risk that Brexit will not be concluded in the near future and Theresa May is suggesting that if her deal is not agreed then the extension could last a very long time.
The good news for the time being means that as a no deal is off the table this could provide the pound with some support in the near future and this is why we have seen the pound make some gains across the board overnight.
Overnight we saw sterling spike to hit its highest level against the euro since May 2017 which highlights the importance of keeping in close contact with your account manager.
Chancellor Phillip Hammond announced his Spring Statement during yesterday afternoon but this did little to affect the value of sterling exchange rates whilst Brexit news continues to dominate exchange rates.
Clearly, whilst the Brexit negotiations are ongoing the Chancellor is in an unenviable position and found it difficult to provide a clear budget as we still do not yet know what will happen to the UK’s relationship with the European Union in the weeks ahead. The forecast as provided by the Office of Budget Responsibility has been downgraded for this year which came as no surprise as all the Brexit uncertainty has caused investment in the UK to decrease and this is in part one of the major reasons for the reduction in the growth forecast.
Indeed, the OBR has downgraded the growth forecast for 2019 to 1.2% which would be the lowest growth since 2009 but it did suggest that any weakness in the economy is likely to be temporary.
Hammond went on to warn that a no deal Brexit would be a significant blow to the economy and also suggested that if MPs vote to leave the European Union then this would mean an additional £26bn to spend.
One positive was that better than expected tax receipts in January means that UK Treasury has been given a positive boost but owing to the Brexit news the movement on Sterling exchange rates was muted.
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