WHATS THE DEAL WITH BREXIT!
First, what to watch this week:
Wednesday, 23 October
This is the real test for the withdrawal agreement bill as parliament will spend the whole day from 1200 GMT on amendments and voting on them.
As mentioned yesterday, the two crucial ones to look out for will be the customs union amendment and the second referendum amendment.
Opposition parties will be looking to amend the withdrawal agreement bill motion significantly and that may just force the government to pull the motion altogether, considering this isn't the Brexit deal they are currently pursuing.
Thursday, 24 October
Assuming all goes well, the debate on the withdrawal agreement bill continues with a third reading vote set to take place on the day as well.
As you can imagine from the above, there are still quite a few hurdles that Johnson needs to overcome to get his Brexit deal across the finish line. The first and key step is, of course, to win the vote today. Otherwise, there is nothing to talk about.
If he fails in the vote today, the ball then gets thrown back to the EU's court on the Brexit extension request.
If the EU doesn't grant an extension, we head towards a no-deal Brexit. If the EU grants an extension, we are most likely headed towards a general election - with a second referendum or further negotiations also among the other options.
What does it mean with parliament voting yes and no?
For the first time, UK lawmakers were able to get behind a Brexit deal (in principle) but they could not agree on the timetable to push through the needed legislative measures for the deal to be ratified and implemented.
That saw the pound go for a bit of a ride as it inched higher before getting dragged lower with Boris Johnson saying that he will "pause" the WAB legislation as he seeks further talks with the EU on a Brexit extension.
Where do we go from here?
As things stand, the "pause" means that Johnson's Brexit deal is essentially in limbo. The ball now moves over back to the EU to decide what happens next on the extension.
If they do not grant one, then we head towards a no-deal Brexit on 31 October.
As unlikely as that is, there is still a slim chance on the table and with politics these days, can you really be surprised by something like that?
Anyway, assuming European member states do the logical thing and extend the Brexit deadline, the ball gets thrown back to Johnson and the UK.
What sort of extension are we looking at?
This is where there is still a degree of uncertainty hanging over markets.
A short technical extension (days/weeks) will leave Johnson with little choice but to try and drag his WAB across the finish line and past the necessary legislative hurdles.
It sounds positive but at the same time, it could all fall apart if parliament amends the bill to something different during the process. Can he accept that? Only time will tell.
Meanwhile, a longer extension (January 2020 at least) is likely to see Johnson call for a general election to try and sort out the mess once and for all.
In short, there are still some imponderables to deal with and markets are left "hanging" at the moment with any decision still not in the offing.
What does this all mean for the pound?
On the balance of things, I actually think the events in Westminster yesterday are "positive" for the pound. In the sense that it is not going to transmit to a significant/dramatic fall in the currency in the near-term.
The worst-case scenario was that Johnson would have pulled the WAB altogether but he "paused" it and made no mention of a 31 October push after he was defeated.
It shows that he is resigned to the fact that we're headed to an extension but what form of extension depends on how talks go over the next few days - and of course how he chooses to deal with yet another impasse in parliament.
As things stand, hopes of getting this all done are still on the table and now that parliament has finally got behind a Brexit deal for the first time - even if it is in principle - perhaps the optimism may be justified at the end of the day.
As such, the pound may be weaker as some uncertainty creeps in and about of the immediate optimism has been dented, but there is still hope and I reckon that will be what buyers will cling on to over the next few sessions.
Deal or No Deal: Brexit’s Impact on Forex Trading
Brexit. As we fast approach the impending leave date of 29th March, the very mention of the word is enough to conjure up an erratic frenzy in citizens and politicians alike. But with the future of the UK’s relationship with the European Union still very much up in the air, what does that mean for the foreign exchange trading market?
Today, we’ll look to explore how the various possible Brexit scenarios could directly impact the GBP and, subsequently, the currency exchange rates and valuations offered on the forex market. Whether it’s deal or no deal, we’ve got you covered.
What we’ve learned so far
Amongst all the chaos of mishandled negotiations, weak and unstable governmental leadership and the protests of a dissatisfied voting population, the GBP has, predictably, been fluctuating in recent months.
Interpreting valuable trading information such as rates on the FTSE 100 index of the major London-listed stocks, general market activity points towards the strengthening of the GBP upon the possibility of a ‘soft Brexit’ and the subsequent weakening of the pound upon a ‘hard Brexit’.
As we fast approach the leave date agreed upon the triggering of Article 50 back in 2016, Theresa May and her Conservative government are still yet to negotiate any form of deal with the European Union commission, with both her ‘soft’ and ‘hard’ proposals facing objections within both the House of Commons and Brussels. So, the question remains; deal or no deal?
Undoubtedly the worst outcome for the UK economy, a no-deal Brexit would result in the UK crashing out of the EU and reverting to the rules of the World Trade Organization. In this scenario, a teething period lasting until December 2020 would look to iron out the exact details of the future UK-EU relations.
The major cause of concern in this scenario is the aspect of uncertainty. The valuation of the GBP during this time frame would continue to oscillate as the UK attempted to stabilize its economy, with the impending possibility of a snap-election and a subsequent left-wing Corbyn government further impacting exchange rates. In relation to the forex market, the unreliable fluctuation of the GBP in the case of a no-deal Brexit would make it an unreliable base currency for any pairing.
An increasingly unlikely option, a deal Brexit would provide a more attractive alternative to forex traders looking to trade the GBP.
This positivity is, however, all relative. The successful negotiations of a defined exit strategy that maps out the future economic, trade and political relations between the UK and the European Union would see the steady strengthening of the GBP following the initial reactionary valuation drop upon departure.
A deal Brexit is likely to have trade agreements at the very core of its foundation as a way of lessening any impending economic damage – however, the initial blow to the rate of the GBP is unavoidable. Though a trade agreement would look to protect a steady recovery of the pound, the initial damage and the unpredictability of recovery time still makes the currency amongst the riskiest ‘majors’ to trade.
Amongst all the uncertainty of Brexit, there is one consistent: the GBP is going to suffer. For traders looking to continue to use the pound as a base currency in the trading pairs, we recommend keeping a very close eye on the latest forex news throughout the next month and beyond as the UK and EU continue in their attempt to settle this ugly divorce.