Brexit update – GBP steady as May awaits fate

Vote of no confidence threatens May’s Brexit deal

We’ve heard that the threshold is about to be, or has been, breached for weeks but now that is very much the case, with 48 letters having been collected triggering a vote of no confidence in Theresa May this evening. The Prime Minister has spent months walking on eggshells and trying to keep Brexiteers just enough onside, while securing a deal that can get through the Commons, but it’s become abundantly clear that she has instead failed on both fronts and this week, the fragile house of cards has come crashing down around her.

This is not necessarily the end of the road for May, however, as MPs may well decide that as much as they despise the backstop – and they do – they hate the prospect of a leadership election, article 50 extension and possible no deal even more. This may all actually end up working in May’s favour and embolden her if it forces the EU to offer a minor concession to get the deal through parliament and removes the risk of another challenge for 12 months. Politics can be a funny old game.

From an investors standpoint this is hugely undesirable, if only due to the level of uncertainty it creates around the negotiations, not to mention the future relationship and the economy post-March 29th. The pound is holding up surprisingly well in the midst of all of this, despite flirting below 1.25 overnight. A defeat for May could see this temporary support break in spectacular fashion as the prospect of no-deal Brexit rises.

GBPUSD Daily Chart

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.