How UK’s Brexit Plan B Vote Could Affect GBP
Daily FX Market Roundup Jan 28, 2019
These days, every single Brexit Parliament vote is a potential game changer for the British pound but in every scenario we’ve seen so far the worst case outcome failed to hurt the currency. Prime Minister May’s Brexit withdrawal agreement saw a crushing defeat. She returned with a second plan that looked very much like the first as it did not include a request for the immediate extension of Article 50. Instead of falling, sterling rose to its strongest level in 11 weeks versus the U.S. dollar and its highest level in 8 months against the euro. So given that tomorrow’s vote will only open the door to more debates and discussions with Parliament or the European Union, the impact on sterling could be even less significant.
There are as many as 19 amendments but the Speaker at around 13 GMT will select the 6 most popular for debate and vote. Voting begins at 19 GMT and will take about 15 minutes per Amendment. Once all of the votes are cast a final one will be taken on the language of the statement. Bear in mind, none of these amendments are legally binding but with enough support May will be pressured into following the proposals with the most backing.
The 4 most popular amendments are the ones put forward by Cooper, Spelman, Grieve and Corbyn.
Amendment I – Spelman’s amendment which rules out a no deal Brexit has the most support of lawmakers
Amendment B – Cooper’s amendment is also likely to pass and has one of the greatest consequences for Brexit talks. This amendment transfers control of Brexit talks to Parliament and would require the delay of Article 50.
Amendment G – Grieve’s proposal is supported by lawmakers from many parties but has less support that Amendments I and B. It sets aside 6 days for the House of Commons to debate Brexit and also requires the extension of Article 50
Article A – Must be debated and voted on as it’s the Oppositions main proposal and put forth by Corbyn. However it has the least support of the four and would involve a vote on Labour’s Brexit deal and a second referendum.
What needs to happen tomorrow is for members of Parliament to extend Article 50, delay Brexit and rule out no deal. Beyond that, May will need to take their recommendations and either come up with an agreement supported by the different parties and take that back to the European Union for discussion or go back to the EU and ask for enough concessions that could help her win support of DUP.
Privately there are reports that Prime Minister May has ruled out a no deal Brexit but there’s been no public confirmation. Regardless of how the votes go, the approval of the Amendments begins a new process of debate and negotiations that will lengthen rather than reduce uncertainty. The European union has already indicated that the withdrawal agreement is not subject to renegotiation.
While the number of approved Amendments will affect how sterling trades tomorrow at the end of the day, it will be the Prime Minister’s next steps that sets the true direction for GBP.