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Sterling nervous ahead of latest Brexit developments

29/01/2019

Sterling is coming under a little bit of pressure as nerves start to fray ahead of tonight’s crucial vote. There is a lot of muttering and rumours about the UK Governments “Plan B”, but it should be noted that the EU has consistently held a firm line that there can be no “renegotiation”, a somewhat generous term for the all-round capitulation of the UK Government, whose approach has been very much along the lines of “We must have a deal and don’t care what it costs – where do I sign ?”.  The current levels of both Cable (GBPUSD) and Euro/Sterling (EURGBP) suggest that investors believe some sort of a deal is likely. The days of “No Deal is better than a Bad Deal” seem to be but a distant political memory.  We now have something called “The Malthouse Compromise” which is not, in fact, the title of a Robert Ludlum paperback, but a proposal that might serve as an elastoplast over the divisions within the Government.  Any such compromise will be seen as widely positive for both Sterling and Euro.  There has been a pretty consistent drip of negative No Deal propaganda from news outlets that should really have more integrity, but it should be remembered that No Deal is currently the default legal option if the Government is voted down again. Whilst there might be some market reaction, the reality of No Deal is simply not the Armageddon that some not only want us to believe, but seem to be actively hoping for.

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