Brexit deadline dates looks to be less and less realistic
15 March, 2019
This week has been a great example of how Brexit sentiment can control the currency markets. On Tuesday, the Pound rallied following news that new assurances on the backstop had been made, which provided great exchange rates for those with Sterling in hand, although this was short lived as hours later the Attorney General confirmed there was no mechanism in place for the UK to limit the backstop and Sterling fell around 1.5%. The PM’s proposed deal was then heavily defeated, but rates maintained some stability. Wednesday followed with an afternoon of further debates before MP’s voted strongly against leaving the EU without a deal, and to the Pounds relief it had gained back most of that lost strength.
Yesterday, the third round of votes went ahead. This time to vote on whether to ask the EU for an extension of Article 50 and delay Brexit. MPs voted 413 votes to 202 and approved a motion to seek an extension until the 30th of June if a Brexit deal can be approved by the 20th of this month. The amendment to break the current impasse through holding a second referendum was voted down with a majority of 249 to 85, opening the way to some welcomed news for the Prime Minister as MPs then won by a narrow majority (314 votes to 312) to leave the government in control and reject the amendment tabled by Labour backbencher Hilary Benn, which would have enabled the House of Commons to hold indicative votes on what kind of Brexit deal should be negotiated.
So what will happen next? It’s important to remember these votes are not set in stone and the power still sits firmly in the EU’s hands. Before any decision can be made the British government must make a formal request to extend Article 50 to the 30th June, which will then be discussed at the EU summit on Thursday 21st March, and requires a unanimous agreement of all 27 Member States. So, for now, the ball is firmly in the European Council’s court.
Unlike Wednesday where we saw Sterling strengthen following the vote which rejected a no-deal Brexit, tonight’s votes didn’t have too much of an effect and rates remained largely unmoved suggesting the results may have been priced into the rates ahead of the votes. It looks like we could see stable markets, at least for a few more days until new news is released.
In the day ahead we can expect to see markets digest the weeks events, but we do have a couple of eco stats to note. Eurozone CPI figure are released at 10:00 although no change is anticipated, and this afternoon at 14:00 The Michigan Consumer Sentiment Index is released, which provides an indication on consumer confidence and whether or not consumers are willing to spend money in the US.
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