Today and tomorrow are big Brexit days again

It’s nearly time for another “meaningful vote” on Brexit an that’s due to happen tomorrow, all being well. Ahead of that, today we should be finding out what bill amendments will be put forward and chosen, as well as whether May will be making any changes to her plan, either by backing any amendments, or by telling us about further negotiations with other parties, Ireland or the EU.

Most of the issues still revolve around the backstop but we know that talks between, May, the DUP and Ireland are ongoing to try and find a suitable solution. Despite the EU giving a flat no to any time limits on the backstop, Ireland will have the final say because its the main party involved. If they agree to something with the DUP and May, then it should be a formality to see it accepted by Barnier & Co.

For the amendments today, The Guardian has a good brief on the main one’s of contention;

  • There are 19 on the order paper, including amendments to amendments, but more could be submitted. They fall into four categories:
  • Opposition party amendments. Labour and Liberal Democrats amendments are already down, and one from the Scottish National party is coming on Monday.
  • Amendments to prevent a no-deal Brexit. The two most important are probably Yvette Cooper’s, enabling the Commons to pass a bill requiring May to seek an article 50 extension if she cannot get her deal passed, and a softer, non-binding one from Caroline Spelman and Jack Dromey, rejecting no deal in principle.
  • Indicative vote amendments. These are focused on ensuring MPs get more chances to express their views. Hilary Benn has one explicitly demanding indicative votes on Brexit options and Grieve has one saying six days in February and March should be set aside for debates on motions not chosen by the government.
  • Anti-backstop amendments. The two main ones are from the Tories Andrew Murrison and Graham Brady, calling for the backstop to expire by December 2021 or for it to be removed from the withdrawal agreement altogether.

Firstly, all or some may get tabled, these things can change at any time, All, some or none could get chosen by the speaker to be tabled for a vote. It all depends on who is backing what. Some similar amendments can be pulled or rolled in with others but generally, each party will fall behind what they see as their best option. Any that are chosen will be put forward for the debate ahead of the meaningful vote tomorrow and will be voted on before the main event. Both anti-backstop and no-deal amendments are positive for GBP in their own ways. Taking no-deal off the table leaves a deal or no-Brexit outcome, while changing the backstop to something different or time limited brings a deal closer, while pushing no-deal further away.

This process of the Brexit bill passing Parliament is not a unique situation. There’s often votes, re-votes and amendments on many bills so this constant back and forth is not something irregular. Because it’s a big subject, it’s obviously being magnified but I just wanted to explain that while the actual process might look a mess, and that May losing the vote a big deal, in fact, the same can happen to other bills.

Could May pull a rabbit out?

This is a possibility. May’s been pretty quiet for someone who has to put her plan back on the table before tomorrow. She’s had cross-party talks and she keeps ruling out taking no-deal off the table. The Sun story on her privately saying no-deal might come off the table looks to be hot air because it is her biggest bargaining chip, something all the other parties fighting Brexit know, so removing it not only weakens May’s hand against the EU, it strengthens the opposition’s hands against May. It’s a double edged sword for her to remove it. So, the silence from May suggests that there’s something going on behind the scenes so we should expect to get some big headlines at any time. There could be two likely outcomes;

  1. She announces an agreement between her, the DUP and Ireland to make changes to the backstop – GBP positive
  2. She announces failed negotiations between the above parties, no movement on no-deal, and her plan goes to the house unchanged – GBP negative

For me, this is the first big risk area and more so than the amendments to follow. Those amendments could all change depending on what she says. For trading, we could get an out of the blue moment.

Update 11.40 GMT – May says – If we are to secure Parliamentary support, some changes to the agreement with the EU will need to be made.

A key line because it would put the onus on the EU to be the ones to agree with any changes May puts forward, or to disagree and risk a no-deal.

For the rest of it, as we should well know by now, expect the unexpected. We could get a delay to tomorrow’s vote or a fresh call for a no confidence vote if May fails again. We could get further party infighting and threats of resignations. Tomorrow’s vote is not the be all and end all. All another defeat means is that May has to continue to negotiate her deal. Again, the vote numbers will be important as a slim loss will mean we’re actually close to something as she’ll only have to appease those few who stood in her way.

For trading it, expect the usual periods of inactivity interspersed with headline volatility. Be careful of the smaller headlines as they may not last and only news on the backstop or a deal or no-deal will bring potentially bigger and lasting moves. I favour the long side so will be looking at any decent dips to get on (depending on the news that caused the dip. The chances of a no-deal are waning by the day so there is no real reason why the pound should suffer and meaningful sell-offs. Never say never in this game though ?

Market wise, we know where the big squeeze points are likely in GBPUSD and there’s been fresh option barrier news, all of which has been made available to subscribers of the ForexFlow platform.




Ryan Littlestone

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