There have been interesting developments within Sterling markets overnight and throughout today’s European session. Yesterday, it was decided that the government was in contempt of Parliament for failing to disclose the outcome of the legal advice it has sought. The provision within parliamentary rules was invoked and voted upon given the argument that the failure to disclose the information is preventing or hindering the work of both Houses of Parliament. The legal advice has confirmed exactly what was expected: the flimsy provisions for the Norther Irish Backstop agreement could result in a perpetuation of a state of limbo where the UK never quite fully separates itself from the EU. This could open up a series of repeated negotiations in which the hand of the UK within the European system is seen not to improve despite the expenditure of considerable effort. Despite being negative, the better-than-anticipated news did afford the Pound limited scope to appreciate. Yesterday’s 1.13% fall in the value of the Pound against the US Dollar, shown in the graph below, can be righty attributed to May’s defeat in the House of Commons. The vote of contempt coincided with the assumption of direction by Parliament should May succumb to political pressure and cease to be PM, allowing the Pound to tumble. The Pound retains modest value nonetheless due to the increased improbability of a no-deal Brexit. Given the opinion offered by the European Court of Justice Advocate General yesterday that the UK could unilaterally rescind the Article 50 declaration, thereby ending the UK’s recessionary path, in addition to the power afforded to Parliament should May lose Tuesday’s vote, it becomes less likely that the UK could leave without a deal.
Today’s Global Market:
Discussion and Analysis by Charles Porter