Pound poised as May tries third time lucky on her vote

The Pound trades at relatively subdued levels but is poised ahead of May’s third attempt to get her Brexit divorce agreement through Parliament.

After no majorities were found from the indicative votes held in Parliament on Wednesday night – an attempt to break the Brexit impasse – the Brexit uncertainty has increased further.  As a result, the Pound has lost some ground over the past couple of days.

The Speaker of the House  (Bercow) had previously said that a third meaningful vote from May was not possible unless there were changes to it. To overcome this, and to give her more chance, May has removed the political declaration about future trade from the vote. As things stand – with the DUP still against the deal – she is expected to lose this vote again but it should be a lot closer than the second time around with a wave of Brexiteers moving to vote in favour of it (over risking no Brexit at all).

If she loses the vote, then the exit date of the 12th April will be in place and Parliament will need to let the EU know their next plans (with a long extension the most likely scenario). The other options are leaving without a deal on that date (odds have increased), announcing a general election, a second referendum… or possibly a 4th meaningful vote (if the third one is extremely tight). May has agreed to step down if her deal gets ratified, but what will she do if she loses? Any resignation from her (if not from deal passing) would create further uncertainty.

All eyes will be closely watching the DUP today, and the rumour mill is in full swing, with reports that they might be making an important announcement this afternoon. Will they be supporting the deal or could they be announcing the end of their confidence and supply agreement with the Tories?  Watch this space.

As a result, the Pound trades at a 1-week low against both the Euro and USD.

The results for today’s vote will be around 2.30-3pm.

Pound makes back some ground as EU offer short extension

The Pound has clawed back some ground after the EU accommodated the UK’s desire for a Brexit deadline extension.

They agreed to two possible extension options. If Theresa May can hold a third meaningful vote, and it passes through parliament (vote expected next week), then they’ve agreed a technical extension until the 22nd May. If, however, she fails to get a majority, then they’ve agreed a short extension until the 12th April to allow MPs to come up with an alternative plan.

These alternative plans could include a much longer extension (for a possible general election, second referendum or alternative deal), leaving without a deal, or revoking Article 50. The odds have now shifted away from May’s deal going through and the odds of a general election, no deal, and second referendum have moved higher.

The Pound has recovered some ground off the back of this news because it has taken some of the pressure off next week’s potential third vote (which was being pitched as a binary one: May’s deal or no deal) . At things stand, May is expected to lose this again (but Brexiteers might have a last-minute change of heart) and without this short extension there would have been increased chance of crashing out on the 29th March.

The EU have played a strong hand during the negotiations and there were firm comments leading into yesterday’s EU meeting (e.g. Macron saying accept this deal or it will be no deal). Fearing a risk of no deal by putting too much pressure on next week’s vote, the EU toned down their language and have been more accommodating than some expected.

When Theresa May was asked about what she would do if her third vote failed, she couldn’t answer the question. She’s previously hinted that she might resign if a long extension to Brexit happens. So watch this space.

As a result, the GBP/EUR and GBP/USD have both bounced back a cent. The next couple of weeks are going to be very interesting and rates are expected to be very choppy.

Sterling down as May requests short Brexit extension and awaits EU’s reply

The Pound has moved lower after Theresa May requested that the EU accept an extension on the Brexit deadline to the end of June.

This is a shorter extension than some in the market had anticipated. She doesn’t want to extend things more than necessary and is hoping it’ll be third time lucky with her deal should she get another chance to put it before Parliament. This short extension would allow the deal (if passed) to be fully ratified in time before the official exit date.

To get an extension agreed, she will need all member states of the EU to unanimously agree to it. There are suggestions, however, that some members are not happy with the suggested date feeling that it should either be a few weeks shorter or a lot longer (to avoid clashing with EU elections). The EU Summit starts today so we will see whether they agree to this date or not.

Although the market has largely priced out the chances of a no-deal Brexit, this shorter extension does mean that if May fails to get her deal through parliament again (possible vote next week), then the extension might not be granted which increases the uncertainty and the odds of a no-deal will also rise (as May seems determined to deliver Brexit).

As a result, the GBP/EUR is down about 1.5% from this week’s high and the GBP/USD is down around 1% from Tuesday’s high. Certainly, Sterling’s move higher has now dissipated and the market awaits further developments over the Brexit saga.

Sterling volatility indexes remain high which means the Pound is like a tightly coiled spring ready to potentially pop (one way or another). It’s unlikely the Pound would be able to break higher out of the recent ranges until a deal is agreed though. Any signs of the Government moving more towards a harder Brexit would obviously take it lower. Increased signs of Brexit going back to the public would likely support the Pound.

Watch this space closely for developments ahead of the weekend and moving into next week as we hit the business end of the Brexit divorce (just to think…. we haven’t even begun to discuss future trade with the EU)

Pound stronger as no-deal voted down

The Pound is higher today after UK Parliament rejected a no-deal Brexit last night.

The original vote was to rule out taking no-deal off the table for the 29th March but an amendment on the vote meant MPs took no deal off the table under any circumstance which went against May’s wishes. Although it’s not legally binding, and the default position is still no-deal on 29th March, it certainly means that they will vote tonight to either get a shorter extension with May’s deal potentially being agreed or a longer extension (which could mean second referendum or less likely a general election).

Theresa May announced that a third meaningful vote would likely happen on the 20th March – a day ahead of the EU Summit – and she’ll be hoping it will be third time lucky.

There have been some significant developments since last night’s vote which have supported Sterling. According to reports, the EU are considering a long extension to Brexit as they feel a short extension would be useless with UK Parliament so divided. A long delay opens the door to there being no Brexit at all.

The fear of there being potentially no Brexit at all has led to some (unconfirmed) reports that the DUP might be willing to support May’s deal after all. If May can win over the DUP then she stands a good chance of gaining a tight majority on her deal. According to many banks, the most likely scenario is a Brexit deal being agreed that is close to the existing one. For example, Goldman Sachs think there’s a 60% chance that May will get her Brexit deal ratified but they also still feel that a second referendum has a considerable chance of happening at 35%.

Tonight Parliament is voting on whether to extend Article 50. We’ll let you know if this causes any major shifts in the Pound.

Pound jumps as May claims legal guarantees over backstop after overnight talks

The Pound has pushed higher overnight after last-ditch talks led to Mrs May stating that “legally binding” changes had now been made over the Irish backstop proposals.

If these changes are legally validated by the government’s top law officer, Attorney General Cox, then it would mean that there is minimal risk of the UK being permanently stuck within the EU after the transition period. This would therefore boost support for May’s withdrawal agreement and give her a better chance with this evening’s meaningful vote.

May suffered one of the largest government defeats in history with the first meaningful vote and she will be hoping for more success for this evening’s vote (which is now likely to go ahead). However, she will need the support of the DUP and the more fervent Brexiteers (who are likely to take their lead from the DUP’s decision) to get it through. So far they’ve been relatively quiet as they’re awaiting to hear more details from the Attorney General and his views over how solid the new amendments are from a legal perspective. If they feel the changes are good enough, then we might expect them to support this deal over the risk of there being no Brexit at all. However, if they feel the changes are a bit flaky, then they’re unlikely to support the deal.

Today is going to be a very interesting day as things develop ahead of the key vote later. MPs still don’t have the full information, so they’ll need to quickly digest everything ahead of tonight. It’s likely we will start to hear more commentary as the morning progresses and the rates will jump around depending on what is being said from the different groups. If the DUP feel comfortable with the changes, and their lawyers confirm the guarantees are strong enough, then we expect Tory Brexiteers to follow suit. This would strengthen the Pound as makes a deal more likely pass.

Conversely, if they’re not satisfied, then May is likely to lose the tonight’s vote which will cause more volatility. Parliament would then get to vote on no-deal (or not) tomorrow and then on extending the Brexit deadline of Thursday (or not). The European Commission have said that there will be no more third chances or changes possible, so any extensions would likely make a second referendum and no Brexit more likely.

As a result, the GBP/EUR has bounced around 2-cents higher from yesterday’s low and hit a 22-mth high overnight. The GBP/USD has moved nearly 2.5-cents higher from yesterday’s low  and trades at a 1-week high.

Here is today’s Brexit agenda today:

  • 09.30am – Cabinet meeting
  • 11.15am – Stephen Barclay speaks before the Brexit select committee
  • Early afternoon – Theresa May opens meaningful debate
  • Around 7pm – Voting begins