The pound looks extremely unsettled in these final stages of the Brexit process with so much uncertainty as to how Britain’s departure will ultimately unfold.
1 million people took to the streets of London on Saturday, marching for a second referendum which attracted much media coverage. This week the pound is likely to be largely driven by Brexit developments and we start with an emergency Brexit cabinet meeting this Monday morning. The Prime Minister is still looking for the numbers to vote for her deal but this is now looking less hopeful, considering the Democratic Unionist Party (DUP) are still not on side. DUP leader Nigel Dodds has said that “the fact is nothing has changed as far as the withdrawal agreement is concerned.”
A meaningful vote could be seen this week although Theresa May has indicated that she may not bring the deal back to Parliament if there is still not sufficient support. Pressure is building on the Prime Minister to stand down although news over the weekend that a care taker Prime Minister could be put in place appear to have been exaggerated.
Nonetheless, there appears to be a wide consensus that a new Prime Minister may be required to take the country into the next Brexit phase whether that is with a withdrawal agreement or not.
The markets will now focus on a series of amendments this week which will aim to take control of the Brexit process away from Government and move it to Parliament. This path could ultimately lead to a general election which too would be likely to result in major volatility for the pound in what are already very uncertain times. The outcome of these votes will help shape the conclusion of Brexit, and this week in particular could make for one of the most volatile to date. Despite the fact that the original date of 29th March has been postponed following last week’s agreement with Brussels, this week still has the potential to create major market movement.
The EU have agreed an extension of Article 50 until the 12th April to allow for another meaningful vote which would then be extended until 22nd May if successful. With the meaningful vote looking distinctly unlikely to be brought to the House again following comments from the Speaker of the House John Bercow, attention is likely to be placed on a proposal from Sir Oliver Letwin which will seek to take power away from the Government. Such developments will likely influence the direction of sterling rates this week.