One day after voting against a “no-deal” or hard Brexit, British lawmakers agree to extend the March 29th deadline For the United Kingdom to leave the European Union. An EU Commission Spokesperson reiterated overnight that any deadline extension must be approved by all 27 member states. British pound futures fell on the news, but have since rallied back to near unchanged on the session.
Headed for a Real Nightmare
There has been one consistent set of reactions to Brexit news in the sterling. Any news that caused uncertainty in the Brexit process has weakened the currency and news where a decision seemed imminent, regardless of whether it was a deal with the EU or a hard-Brexit, has resulted in higher prices. Given that 8 of the least 11 sessions (today not included) have been lower, you can infer that the closer we get to the original deadline, the less faith the market has had in the UK government to provide some clarity going forward. Several no-votes of both Prime Minister Theresa May’s negotiated deal with the EU as well as yesterday’s rejection of a no-deal Brexit left one unnamed European official to comment, when asked about the prospect or approving an extension of Article 50’s March 29th deadline, “It would certainly help to know what the UK Parliament might vote yes on”. This is more than a circus; it’s a nightmare especially for Bank of England Governor Mark Carney who will no doubt be called upon to do as much as possible to spark an already slowing UK economy once this is all over. The prospect of a second public referendum on Brexit itself is gaining popularity, but it would be a huge blow to markets to think that a parliamentary democracy denied the original will of the people simply because they couldn’t get on the same page as to how to achieve the result they asked the populace to vote on. Studies have shown that UK citizens have become tired of the process and would likely vote to remain in the EU if a second referendum were to take place. The thought that you may be able to stall the will of the people would be a scary thing for politicians to see in practice and even scarier for anyone exposed to the FTSE 100 or the British pound.