A Crushing Defeat For May

16 January, 2019

Simon Eastman

Last night we had the results of the parliamentary vote on Theresa Mays Brexit plan and although widely expected to be defeated, I’m not sure anyone thought it would be by such a margin.

In the largest ever defeat for a “sitting” Government, MPs voted against the deal, by 432 votes to 202, a crushing rejection of the deal. Despite all her efforts to garner support over the past few days of deliberation, MPs showed little support to the Prime Minister, with 118 Conservative ministers voting against her. As would be expected, Jeremy Corbyn, the Labour leader has tabled a “vote of no confidence” in the Government, which May has agreed to debate today. She has less than 24 hours to save her job, as MPs will then go to the vote again at 7 pm tonight and will be asked to vote on the motion “That this House has no confidence in Her Majesty’s Government.”

The DUP have confirmed they will stick by Theresa May and her own party members cannot call for a no-confidence vote in her for 12 months following the recent attempt, but should MP’s vote no confidence tonight, the Government will be no longer and we would enter a 2 week period where a new Government would seek to be formed, potentially with a new party leader if May decided to step down. If no party is formed in that fortnight, a General Election would be called.

British politics on the edge of implosion and the Brexit deal by the wayside, the coming days will almost certainly be full of uncertainty and market volatility.

Surprisingly markets seemed to favour the outcome of the vote last night, with the pound making immediate gains against its major pairings. GBP/EUR gained a cent and a half in less than an hour whilst cable gained 2 cents. This sentiment seems to align with the gains of Monday, when May announced “no Brexit, is better than a no deal Brexit”, indicating markets favour no Brexit also, despite the fact, May was saying this only to try and sway support away from “no deal”, towards her less than popular “deal”.

So as the markets reopen in the UK and start to digest the news, we have a flurry of eco stats to take on board too. German inflation comes early doors ahead of UK Governor Mark Carney giving a speech at 9.15am. Given the events of last night, this may well throw up some major swings in exchange rates as could UK inflation released at 9.30am. The rest of the day sees some medium level US releases including import and export figures, plus the Feds Beige Book at 7 pm (an overview of the general economies wellbeing) which will almost certainly be overshadowed by the commons no-confidence vote, also at 7 pm.

Another critical day in British politics and almost certainly another busy one for the financial markets, so if you have any currency exchange to make in the coming days or weeks, speak to one of the team this morning to discuss your options.