Sterling is suffering further losses this morning, as rumours swirl that Theresa May has called off tomorrow’s vote on the Brexit deal. It was widely expected that she would lose the vote, and it seems she has now decided that it won’t go ahead, for now. Britain is now facing a constitutional crisis that is weakening the Pound due to the uncertainty it is causing.
At the time of writing GBP/EUR rates have dipped into the €1.10’s and GBP/USD rates have fallen into the $1.26’s. The reason for the drop in the Pound is simply the uncertainty that this news generates.
The Sunday Times reported that the vote might not go ahead, but Number 10 were adamant that it would be. That looks to have changed this morning. May is expected to make a statement to the Commons at 3.30pm so we will have a clearer picture of the situation then.
What will happen to Sterling next?
While uncertainty remains, so will pressure on the Pound. We will report on this blog what is expected to happen next when this becomes clearer. I think that it’s likely another date for the vote will be set, which will give time to try and negotiate concessions from the EU with regards to the backstop.
There are so many variables and possible outcomes, it’s impossible to predict what will happen to the Pound in the short to medium term. Theresa May could face a leadership challenge, there could be a general election. Another referendum is unlikely but is not ruled out. I think that in order to avoid a Hard Brexit the EU will need to make some concessions with regards to the Irish Backstop, in order to drive this forwards. While any progress is lacking, I think that the Pound is likely to remain under pressure.
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