Overall focus will remain on the House of Commons ahead of next Tuesday’s meaningful vote on Brexit. The government yesterday was reportedly considering backing an amendment to give extra protection for workers, which commentators said was an attempt to gain support from some Labour MPs for the meaningful vote. As noted on Wednesday, the government will now have to outline next steps within three sitting days if it loses the vote.
In Brexit news, PM May is reported to now be in favour of giving MPs a vote on alternative proposals to her Brexit plan. Then on the other side of Brexit, the EU will today publish a package of 14 contingency proposals aimed at avoiding the worst effects of a ‘no deal’ Brexit. Focus will then turn to US and the Federal Reserve decision last today.
Vote of No Confidence called on PM May, so what happens next? Early reports suggest vote secret ballot will take place tonight between (6-8pm) If a majority of Tory lawmakers vote that they have confidence in May, she cannot face another such vote for a year. If a majority vote against her, she must resign as leader, and cannot run in the contest to replace her. Brady would then organize a contest for a new leader. May would be likely to stay on as prime minister until her successor was chosen.
The media has reported that up to 100 Conservative MP's will vote against the PM’s Brexit deal, leaving it a complete non-starter. PM May still has time to convince her MP's, but this is becoming even more unlikely after news broke yesterday that PM May has ruled out a Norway-style deal as a back-up plan if the government lose the vote in the House of Commons. PM May and the leader of the Opposition Jeremy Corbyn will have a televised one-hour Brexit debate on Sunday December 9th, just two days before the vote in Parliament. If PM May’s proposal is rejected, the Brexit negotiations may take another turn for the worse, impacting the value of Sterling.
As mentioned in yesterdays report, I wanted to explain what could happen over the coming weeks for those with exchanges that need to be completed by end of year or early January 2019. We now know the PM will spend the next couple of weeks trying to sell her Brexit deal to the UK public and, more importantly, the UK Parliament, warning that it is the best deal possible and that any other versions would hurt the UK economically. The vote in the House of Commons is now expected on December 11th and is expected to be rejected in its current state but then could be approved it on a second attempt amid market pressure, according to UBS Wealth Management’s chief economist Paul Donovan. He reckons that prediction is now the consensus view in financial markets. Thanks to Bloomberg here’s a rundown of how things are likely to unfold over the coming weeks, according to UBS’s house view, which Donovan set out in an interview in Brussels.
The US dollar moved slightly lower yesterday, while sterling received a lift from the latest Brexit news. The BoE’s hawkish comments on UK interest rates may also have provided some support to the pound. Today seems likely to be a relatively quiet end to the week as markets await the outcome of this weekend’s EU summit.
PM Theresa May was in Brussels yesterday and she is scheduled to return there on Saturday to finalise a deal on the outline of a future trading relationship with the EU. That, together with the Withdrawal Agreement, is expected to be signed off at a special EU-27 summit on Sunday.
With market sentiment for GBP/EUR rate on a sideway trend at time of writing - Current key trading level is now around the €1.1280’s. If we see the rate move Higher than this level for a sustained amount of time, then the likelihood of the rate moving into the low €1.13’s will be high. A leadership challenge is still hanging over PM May but the longer it fails to transpire then least likely it will be to happen however some analysts are suggesting that some Tory MP’s are holding off to see how PM May preforms in Europe this weekend when she looks to get the approval for some amendments. Any delay or cancellation of November’s Brexit Summit will most likely be seen as negative for the GBP/EUR exchange rate but on the flip side if she comes back from Brussels with the amendments she needs to keep her cabinet/DUP happy then we could see the GBP/EUR rate move higher once again.
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