The pound struggles after the latest statement from Number 10

The pound struggles after the latest statement from Number 10

They say no news is good news, but when it comes to Brexit, it’s clear that businesses and investors are desperate for any measure of certainty – and that is currently in short supply

As Theresa May addressed parliament, it was clear very early on that she had no new detail to offer. She stated that talks with the EU were ongoing, although the EU maintain that they will not negotiate the existing deal. Plans for a possible vote on Thursday were scrapped in favour of a longer debate and the prospect of moving the vote on an amendable bill to later in the month. 

Opposition mounts for back-stop alternatives

Leader of the Opposition Jeremy Corbyn had stern words for Theresa May after her statement, and presented instead Labour’s alternative plan. May stated that this plan for a customs union brought with it free movement and was not a reasonable alternative. The two leaders are still poles apart when it comes to Brexit, and when coupled with the divisions within parliamentary parties, it makes the issue much harder to resolve or predict the outcome. The PM maintains that a solution can be found, but it’s clear that the situation is going down to the wire and while the country holds its breath and the uncertainty continues, the pound may struggle to make any gains and is likely to react to whatever reports and rumours suggest the possible outcome of Brexit appears to be at any given moment.

Warning from Mark Carney on a new world order

In a speech given at almost the same time as Theresa May’s statement, Bank of England Governor Mark Carney reflected on the general state of world trade. While he highlighted the short term risk of a no-deal scenario, he noted a general change in world trade. If the worst of protectionism could be avoided – and Carney singled out the US for censure in this area – then there may be an opportunity for countries to develop new trade relationships in the future. The BoE Governor called Brexit the first test of a new global order, but warned again that if the UK leaves without a deal, it could have disastrous consequences for the economy – and by extension, for the pound.

The pound will go where it will

On February 14th, MPs will debate an amendable Brexit motion, but plans to hold a vote that evening have been scrapped. The vote may be held the following week on 21st February, but the deadline is the 26th February. If there is no agreement by this point, the government will make a statement to MPs and hold a debate on an amendable motion on Wednesday 27 February. All of this puts the pound in a difficult position which may become even more perilous if a no-deal Brexit comes to pass. In an interview, leading Brexiteer Boris Johnson stated that, “the pound will go where it will.” However, the numbers show a link between progress in the negotiations and the fate of the pound. Currencies thrive on certainty and unfortunately for sterling, that has been in short supply in the UK. The latest statement has done nothing to improve the situation, and it’s likely that the pound will remain volatile for some time to come.

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