Pound tumbles as May pulls tomorrow’s Brexit vote

The Pound has been tumbling today after reports that Theresa May has delayed tomorrow’s Parliamentary vote on the Brexit deal.

Rather than suffer a huge defeat in Parliament, she has opted to pull the vote last minute and she will instead travel back to Brussels to renegotiate the terms with the EU. Meanwhile, the EU have said that they are not willing to negotiate again and that this deal is the best and only deal on offer. The odds of a no deal scenario have therefore increased and uncertainty has risen further leading to a weaker Pound.

It seems her focus will be on trying to get some legal assurances from the EU that the Irish border backstop agreement will not last forever. Many are unhappy with this backstop proposal as it could technically keep the UK trapped within the EU indefinitely but leave us without a seat at the EU table. It’s a tough ask but there might be some wiggle room on this from the EU because it wouldn’t necessarily mean re-opening the deal but rather adding something onto it. If she can achieve these assurances, then she would stand a much better chance of getting her deal through Parliament. If she can’t, then it opens up the options of either a UK general election, a second referendum or to the UK leaving without a deal.

As a result, key support levels have been broken which has led to some large swings lower in Sterling. The GBP/USD has lost nearly 2.5 cents today and currently trades around a 20-mth low. The GBP/EUR is down by around 2-cents and trades around a 4-mth low (but not miles away from a 20-mth low!)

Due to the limited days left this year, the vote is unlikely to happen this year now. So, unfortunately, this Brexit circus is likely to continue well into 2019. (Yawn!!!!)