Government defeat to weigh down Sterling
Last night’s Parliamentary vote on the Finance Bill, the statute that enshrines the UK Government’s budget proposal into law, and which, by convention, usually has a safe passage through the Lower House, was hijacked by a cross-party amendment to hinder the possibility of a ‘no deal’ Brexit. Of course, such a deal is now the default option if an agreement cannot be reached with the EU that is acceptable to the MPs, many of whom desire to see the UK remain shackled to the EU in defiance of the referendum outcome. This is really little more than an attempt to handicap the UK in any further negotiations with the EU, and is the equivalent of going into a car dealership and loudly announcing the absolute upper limit of your budget and expecting them not to try and milk every last penny out of you. Naturally this type of Parliamentary shenanigans is designed to hurt Sterling, and so it will prove, because, as we know, markets dislike uncertainty and all this cynical move has done is amplify it. We’d be surprised to see Sterling over 1.29 in the foreseeable future, with the risk now strongly weighted to the downside.