With time running out, British Prime Minister Theresa May faces the Parliament after further negotiations with the leaders of the EU on the ‘backstop’ in Ireland and will put it to them for a vote.
Ahead of the vote, the Sterling, in volatile trading added three cents from the lows of Monday with the hope from traders that her proposal will gain the support of Parliament.
What’s the real story?
This upcoming week, crucial Parliamentary votes for the Brexit deal will take place with the first one on Tuesday. We are reminded that the last time it was put to the vote in January she was voted down by a 230 margin.
• Wednesday, 13th March MP’s will vote on whether the UK should leave the European Union without a deal.
• Then on Thursday, 14th March if the vote was against a no deal, they would vote on a Brexit delay (extension).
The Irish backstop
With the main issue revolving around the Irish border and how to avoid a hard Brexit between the Republic of Ireland and Northern Ireland borders.
The EU advocating that the entire UK remains in a customs union with the EU. This is the Irish backstop and will ensure no checks along the Irish border.
Will there be a Brexit extension?
Lawmakers in Britain have rejected the deal on worries it may be trapped in the customs union indefinitely on the grounds that the UK will be prohibited from striking trade agreements with other countries.
The PM was sent back to Brussels to strike a better deal with Brussels and try to get assurances that are legally binding which could be used as a formal dispute against the EU if they tried to keep the UK tied to the backstop.
The EU has refused to grant any meaningful legally binding pledges repeatedly.
Ahead of the crucial vote, Theresa May said that she has changes to her Brexit deal that are ‘legally binding’.
According to news reports, any changes that the EU grant won’t be legally binding. When put to the vote in Parliament, it is more than likely to suffer rejection once again.
That’s not all…
If rejected and with the looming official date of Brexit on March 29, the next vote will decide if the UK will leave the EU without a deal. The consensus is that the majority will vote against a no deal exit which has resulted in the latest rally of the pound.
If the MPs votes for an extension the pound could see an upside, but if an extension is voted down the pound could collapse.
Uncertainty is prevailing, with neither sides willing to make concessions and may come down to politicians feeling pressure as the extension date (if voted) looms forcing them to make compromises. This will keep the pound on the downside in the near term.
Will the sterling rise or fall?
On the bright side, there are only two alternatives, Brexit with a deal, or no Brexit, as already seen a no deal exit is clearly what the UK Parliament does not want. Either scenario could see the pound sterling rally.
Bottom line?
As the Brexit deal has been rejected by the Parliament once again, market volatility is expected and you need to be prepared for trading opportunities particularly with the Sterling and other UK-oriented assets.
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