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Forex - Pound Rallies as May Looks to Avoid Brexit Bill Defeat

BrexitJun 12, 2018 17:27
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© Reuters. - The pound rallied on Tuesday afternoon as it looked like Theresa May had avoided defeat in the first round of votes on the House of Lords’ EU Withdrawal Bill amendments, particularly the ‘meaningful vote’ amendment.

Over three sessions on Tuesday and Wednesday, parliament is debating fourteen amendments to the EU Withdrawal bill tabled by the House of Lords. The House of Lords sent fifteen amendments to the House of Commons, however the government agreed with one regarding replicating EU law in UK law after Brexit and continuing participation in EU agencies.

Following the first round of voting, the government looked to have secured a last minute victory by winning over rogue Tory backbenchers.

Amendment 19 on the ‘meaningful vote’ from the House of Lords would have weakened Theresa May’s negotiating position as it would have allowed parliament to vote down the Brexit deal, and then send May back to the negotiating table in Brussels.

During the debate, Conservative MP and Solicitor General Robert Buckland said that he was willing to discuss Tory MP Dominic Grieve’s amendments to the 'meaningful vote'. The promises of further government amendments to Grieve's bill may have swayed Tory rebels, meaning that the Theresa May is able to clinch a narrow win.

The amendment as suggested by Dominic Grieve, who defeated the government in December by ensuring parliament would be able to vote on the final deal, looks to allow parliament to take charge if there is no deal, ensuring that the UK does not ‘crash out’ of the EU without a deal.

If accepted by the government, Grieve’s amendment will return to parliament in the coming weeks. This is a concession the government may have had to make to get rebels on side from voting in favour of the more extreme amendment to the bill proposed by the House of Lords. It is rumoured the PM met with a number of rebel MPs on the day to persuade them to vote with the party. This came following the resignation of Justice Minister Phillip Lee on Tuesday morning because of the handling of the Brexit negotiations.

Sarah Wollaston, a potential Tory rebel tweeted at the end of the Commons debate that she would support the government: “Following further assurances that further Govt amendments will come forward in the Lords, I will now be supporting the Govt”.

The vote in the House of Commons on the 'meaningful vote' will take place at 16:45 GMT.

During the debate, the pound was largely flat, dipping into the red. At 16:30 GMT, as the Commons rejected the first two Lords’ motions, the pound rallied to the day’s highs. GBP/USD jumped 0.30% to 1.3420, while EUR/GBP was down 0.31% to 0.8782.

The pound rallied against most major currencies, with GBP/JPY lifting 0.48% to 147.93 and GBP/CHF up 0.20% to 1.3210.

The pound rebounded from 2-week lows earlier in the session on robust labour figures from April. As expected, unemployment remained at the decades-low 4.2%, while average earnings excluding bonuses grew 2.8%, missing expectations of 2.9% growth.

Investors will be watching the release of consumer price index for May due to be released on Wednesday. CPI is expected to be 2.5%, higher than April’s 2.4%.

Forex - Pound Rallies as May Looks to Avoid Brexit Bill Defeat

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