I’m having Deja-vu, it feels like we’ve been in this exact same situation before!
MP’s will finally vote on Theresa May’s deal on Tuesday 15th January (Which is also my birthday, so I am hoping for a calm day on the markets…), providing the vote actually goes ahead this time- there a few scenarios which can occur through this week.
The first outcome is that the deal passes through Parliament- nice and simple, Sterling rises and we are on track for the March deadline to leave the EU with a deal and confidence begins to return to the markets. (However, according to analysts, this is the most unlikely outcome).
The next outcome is, of course, the deal not getting through- the instant reaction following this is that the Government will have two days to respond with a plan of action- most likely with a renegotiation with Brussels to amend the deal to get it passed. This is probably the most simple outcome, however, there are more which could cause further market volatility- please see below-
- A no-confidence vote in the Government- The Labour party seem pretty confident that they will table a vote of no confidence if the deal does not pass on Tuesday, the consensus is that Labour does not have much of a chance of winning this, however it is something they wish to get out of the way to they can take a step towards backing a second referendum.
- Parliament takes back control- This is self-explanatory, Parliament would hold a set of votes of parts of the deal to find out which are ok to go ahead with and not, to then restructure a new deal.
- Another election
- A second referendum
- Article 50 gets extended (This would automatically happen with the last two options)
The simple fact is, we do not know what the outcome will be on Tuesday, and if the vote doesn’t work out for the PM, then a can of worms will be opened- which will certainly have an impact on exchange rates. If you would like to future proof your plans for your FX, please don’t hesitate to get in touch.