The pound has rocketed higher after Prime Minister Theresa May secured legally binding changes to the Brexit withdrawal agreement which was agreed with the EU late last night in Strasbourg.
The deal now includes a series of measures to include a stronger political declaration and other assurances that Theresa May hopes will convince MPs to vote for the deal so that Britain can withdraw from the EU on the 29th March 2019 as planned. It was all smiles in Strasbourg when the Prime Minister arrived but it is worth highlighting that European Commission President Jean Claude Juncker has stated there will not be a third chance to re-negotiate. He stated that “there will be no further interpretation of the interpretations and no further assurance on the reassurances.”
Today is now a crucial day in British politics with a meaningful vote in parliament expected to be held this evening at 19:00, and high volatility is to be expected. Due to the last minute breakthrough which was only agreed late last night there is the prospect of a delay to allow sufficient time for the changes to be debated in the House of Commons and an extra 24 hours has been proposed.
The devil is in the detail and a statement is expected from the UKs Attorney General Geoffrey Cox today which will more than likely dictate whether the Prime Minister is successful. If Geoffrey Cox can state categorically that Britain can come out of the backstop unilaterally then the deal may have a chance of success. The European research Group and Democratic Unionist Party (DUP) will no doubt make the headlines throughout the course of the day and their views too will likely carry significant weight across the House. The last meaningful vote saw a historic defeat with the Prime Minister losing by 230 votes. How the vote goes will depend on whether enough changes have been made on the contentious Irish backstop.
If Theresa May can win support of the House then the pound is likely to see further gains across the board, although if the deal is voted down there will be a period of deep uncertainty for sterling exchange rates. Another vote would be held on whether to proceed with a no deal Brexit, and if that is rejected, another on whether to delay and extend Article 50. With reports having emerged that a delay could result in a constitutional crisis which could end up in the Government unable to govern it does still leave the spectre of no deal on the table. There are still so many political options still available that the markets are still none the wiser at this major juncture. As such the pound faces an extremely volatile few days ahead.
For more information on the potential outcomes of today’s vote and subsequent votes after this, download our monthly currency forecast.
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