Last week, the Pound hit three-month highs against the US Dollar (GBP/USD), while reaching 20-month highs against the Euro (GBP/EUR). However, today the British currency might be in for some market volatility, as economic events unfold and the UK parliament meets to discuss Brexit, and vote on amendments.
The Pound exchange rates softened on Monday in anticipation of the voting on Tuesday, with markets uncertain as to how the chips may fall. Theresa May will return to parliament on Tuesday with her Plan B, which is essentially the same as Plan A. She will state she’ll ask the EU to negotiate the backstop with her further (with a potential time limit on it), and ask MPs to vote on the revised deal.
In theory, this makes sense, but Brussels is insistent that this is the best deal on the table. On Monday, European Commission spokesperson Margaritis Schinas commented:
‘We have a unanimous EU27 position on the withdrawal agreement which reflects the common EU position. This withdrawal agreement has been agreed with the UK government, it is endorsed by leaders and is not open for renegotiation.’
Despite many statements suggesting the deal isn’t up for discussion again, the Prime Minister’s spokesperson also suggested on Monday that the Brexit deal would have to change, and the EU would need to compromise.
The PM’s spokesperson said:
‘What we have consistently heard from European leaders is that they want the United Kingdom to leave with a deal. There’s a recognition that the United Kingdom leaving with a deal is in their best interests, as well as those of the UK. The deal which has been agreed was defeated by parliament. Therefore, if we are going to leave with a deal, clearly we are going to need to make some changes in order to win parliamentary support.’
With all this back and forth and with a number of amendments on the table to vote on, the Pound could be in for some significant exchange rate volatility. The voting will take place around 7pm on Tuesday night, after May closes the Brexit discussion.
Investors will be looking at Amendment B which has been signed by 103 lawmakers and been put forward by Labour MP Yvette Cooper. The amendment would attempt to shift control of Brexit from the government, to parliament, and is seen as having a strong likelihood of succeeding. Meanwhile, Amendment A was put forward by Jeremy Corbyn and calls for parliament to put in place different options to prevent a no-deal Brexit, such as a second referendum, or a permanent customs union.
The Pound to Euro (GBP/EUR) and Pound to US Dollar (GBP/USD) exchange rates are expected t0 be incredibly volatile in today’s session, meaning rapid fluctuations could take place. So far on Tuesday, the GBP/USD exchange rate has been trading in the range of 1.3129 and 1.3168, while the GBP/EUR exchange rate is trending in the region of 1.1479-1.1513.