It’s been a positive day for Theresa May, following news that the government had won today’s crucial vote inside the House of Commons.
Victory was achieved by a narrow margin of 319 to 303, meaning that the government did not need to add any clause into the Withdrawal Bill in the case of no Brexit deal being agreed.
Despite this victory the market’s reaction was muted, with Sterling making only minimal gains against both the EUR & USD.
MP’s were given assurances that they would have a meaningful say in the process, although further internal battles are likely over the UK’s trade and customs arrangement with the EU post Brexit.
For the time-being however, Theresa May can now head next week’s EU summit in a seemingly stronger position than she might have been, had the vote gone against her.
Whilst Sterling has yet to make any meaningful impact against its major counterparts, it seems to have curbed any further losses. GBP/EUR rates have moved towards 1.14 by the close of European trading, whilst GBP/USD continues to trade around 1.32.
One of the reasons the Pound may not have gained further support, is today’s reports indicate a long road ahead and tis likely that further splits inside the government will appear. Investor confidence in the Uk economy seems to have fallen again, with the Pound unlikely to gain the sustained support it requires, in order to make any significant impact in the short-term.
Looking ahead and tomorrow may not provide the boost those clients holding Sterling positions are looking for, with The Bank of England (BoE) set to release their latest interest rate decision and monetary policy statement.
It almost a certainty that rates will be held at 0.5% but it is BoE governor Mark Carney’s subsequent speech, which is likely to have the most impact on the markets.
With so much uncertainty around the current state of negotiations, both internally within the government and externally with the EU, I am not anticipating any nod towards a short-term hike in rates. If his tone particularly dovish, then the Pound come under further pressure tomorrow.
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