Pound down as May’s Brexit deal faces stern criticism
Sterling has lost ground this morning as concerns increase that Theresa May’s Brexit deal will not get the votes needed to pass through UK Parliament.
EU leaders quickly approved the draft agreements on Sunday but criticism has been mounting over Theresa May’s deal from across the parties and even from those close within her own party. This morning a close ally of May, Sir Michael Fallon, said the deal is “doomed” and that it was the “worst of all worlds”. Overnight President Trump also snubbed the deal, stating that it “sounds like a great deal for the EU” and that the withdrawal agreement might mean the US can’t make a trade deal with the UK.
At this stage, it seems unlikely that Theresa May will get the votes needed to ratify this deal and ensure we move into the 2-year transition period after we leave in March. The vote is expected to be on 11th December so there isn’t much time for May to try and sell this deal to lawmakers. If the deal is initially rejected by Parliament she will get another chance but if it gets rejected a second time then we enter unchartered waters.
The following are different scenarios that might then play out:
- A second referendum – vote to accept new deal, vote for new deal, vote no deal, or vote to cancel Brexit (remain).
- A general election.
- Renegotiate for a better deal with EU.
- No deal.
It’s very likely, however, that for any of the first three scenarios to happen there would need to be an extension to Article 50 and this would require unanimous agreement from every EU leader. If May’s deal is voted down then we’d expect the Pound to weaken due to the uncertainty but some of this is already built into the rates. A lot can happen between now and the vote, however, and it’s likely to be a turbulent few weeks for Sterling.
As a result, the Pound has pushed back down towards the lower end of it’s ranges. The GBP/USD has lost a cent from yesterday and trades at a 10-day low and the GBP/EUR is down half a cent.