It promises to be another dramatic day in London on Wednesday, as May follows a crushing defeat on her Brexit deal with a fight to save her government in a no confidence vote in parliament.
As it stands, the vote would appear to stand no better chance of succeeding in parliament than May’s Brexit deal but as with much of what we’re seeing, this is a process – a box ticking exercise – that allows MPs to move onto other solutions. Labour has repeatedly stated that its preferred alternative is an election and it would consider a second referendum if this failed, so this is the natural next step.
It is tempting to think that Corbyn would not have called a no confidence vote if he didn’t think it could pass but the same was said in December when a similar vote was called in the Prime Minister. That attempt failed miserably, the only difference being that it cannot be repeated for another 12 months. The same is not true of today’s vote which can be repeated as often as the opposition would like.
With that in mind, it’s no surprise to see the pound relatively unchanged over the last 48 hours despite all of the volatility in the interim. Aside from certain processes being ticked off, we don’t feel any closer to a deal actually being agreed in parliament. One thing that is clear is that the process has now been dramatically accelerated which should spur further volatility in the near term.
Attention won’t shift far from London today, with the only notable economic events focusing around the UK. It’s felt like a long time since the central bank was the centre of attention, both in terms of the Brexit debate – much to the relief of Governor Mark Carney – and interest rates which depend heavily on the debates taking place in parliament currently and the deal that’s agreed upon.
We’ll hear from Carney today as he appears alongside three of his colleagues in front of the Treasury Select Committee to discuss the financial stability report. As ever with these appearances, the committee will often stray from the intended subject and use the opportunity to get the Governor’s views on the topic of the day. Well, no topic is more relevant and controversial on this day than Brexit, a topic Carney has been repeatedly pushed into giving his views on in the past, much to the anger of Brexiteers.
We’ll also get inflation data from the UK this morning, but as mentioned above, this is bordering on irrelevant at a time when the future relationship with the country’s largest trading partner is up in the air. Ultimately, the outcome of negotiations, debates and votes over the next couple of months will determine how interest rates behave, more so than inflation data for December. Especially given that the outcome will directly impact these figures, as it did in the aftermath of the referendum.
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