Orderly Brexit not a step closer due to May's act

British Prime Minister Theresa May survived a vote of no confidence on December 11. Unfortunately, this is not one step closer to an orderly Brexit.

May does not have it easy: her party members have been looking at her chair legs for almost 2 years. It is only a matter of time before she is brought down, but it is not yet that time. Tuesday evening, December 11, it turned out that most of her party still supports her.

The postponement of the vote on the Brexit agreement had caused some bad blood within the party at the beginning of this week. May chose to postpone the vote as she threatened to face a major defeat. Still, she certainly didn't get through this week unscathed.

Chaotic departure
The voting round on the agreement has been postponed, but should come soon. In addition, support within the Conservative party is less than what it was counting on. More than 33% of her party members would rather see her leave: 117 against 200.

In order to win the favor of MPs, she has pledged that she will not lead the party in the 2022 elections. In the meantime, however, much remains to be done. On March 29, Great Britain will leave the European Union (EU). It looks like it's going to be a chaotic room.

Hoping for a miracle
It is unlikely that May will be able to gain sufficient support within her coalition for the agreement she has negotiated with the EU within a few weeks. On the other hand, the EU has indicated that better conditions are not in it.

May is stuck, but there are 2 bright spots. Party rules state that no new motion of no confidence can be filed within 12 months. Moreover, she will soon have some time to come up with a good strategy. The Christmas recess begins in the House of Commons on December 20.

Pound measures sentiment
The British pound has been a good indicator of Brexit sentiment in recent years. When it became clear that May was postponing the vote, the currency fell by 1,5%. Since the spring, that damage has come to almost 10%. Although a small part of the loss was made up on Wednesday, December 12, the price reacted lukewarm to the news that May may stay on.

The pound will only really move again once the chances of an orderly exit from the EU diminish (or if May suddenly... a rabbit out of the top hat). The latter is not inconceivable. Earlier this week, a European court ruled that Britain can end Brexit on its own initiative. And for May, a no-Brexit is becoming increasingly appealing.

Joost Derks

Joost Derks is a currency specialist at iBanFirst. He has over twenty years of experience in the currency world. This column reflects his personal opinion and is not intended as professional (investment) advice.

© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.