Pound falls as investors fear for a hard Brexit
Following the parliament vote which rejected an extension to the Brexit timeline, the pound was at US$1.3069, weaker from Monday night’s US$1.3157.
The British pound fell against the United States (US) dollar and euro after the British Parliament turned down a proposal that would delay Brexit and prevent the country from crashing out of the European Union (EU) without a deal.
On Tuesday, the United Kingdom (UK) Parliament voted 321 to 298 against the Cooper amendment, a proposal which attempts to cancel out a no-deal Brexit by giving the government more time to reach a formal agreement with the EU.
Following the vote, at around 5.30am Singapore time, the pound was at US$1.3069, weaker from Monday night’s US$1.3157. Prior to the vote, the currency had traded flat against the greenback. The pound also weakened against the euro, down 0.8% at 87.52 pence per euro.
Britain is currently scheduled to leave the EU on March 29th. The Cooper bill would have pushed back Brexit’s date to December 31st, minimizing the chances of a no-deal Brexit.
Observers and analysts have cited a no-deal Brexit as being negative for the UK economy.
Brady amendment to change Irish backstop passed
The currency held back after the UK Parliament passed another amendment called the Brady amendment in a 317 to 301 vote. The Brady amendment seeks to change the Irish backstop.
The Brady proposal was backed by Mrs May herself to show to the trade bloc that a change to the Irish backstop will help in pushing the Brexit deal forward. Mrs May will now return to Brussels to try to get legally binding changes to the existing agreement.
May to return to Brussels to tussle with details on Brexit deal
Brussels have explicitly said that it does not want to change the withdrawal agreement that was agreed at the end of last year.
While Mrs May cleared the Brady amendment, she had admitted that there was ‘little appetite’ in Brussels for a renegotiation, a point which was confirmed by EU council president Donald Tusk who said the existing deal was the ‘best and only way to ensure an orderly withdrawal’.
On January 15th, the UK Parliament overwhelmingly rejected Mrs May’s initial proposal for Brexit in a 230-vote defeat. A major objection to the deal was on the backstop arrangement that the EU insists on as a guarantee to prevent the Irish Republic and Northern Ireland from a hard border.