Brexit deal voted down, now what?

The House of Commons on Tuesday evening, January 15, voted down the Brexit deal that British Prime Minister Theresa May concluded with the European Union (EU). If the prime minister survives a vote of no confidence on January 16, there is a good chance that Brexit will be postponed or even canceled.

De defeat of May comes as no surprise. More than 1 month ago she postponed the vote, mainly because a painful defeat was inevitable. This time she didn't have that luxury, as it will be March 10 in just over 29 weeks.

There's a party everywhere
The defeat is especially hard for May, because no fewer than 108 members of her party voted against the agreement. The message is clear: May's Brexit deal has been brushed aside. That was celebrated in many camps on Tuesday. The pro-European camp was especially happy that an exit from the EU was possible still turned away can become.

Brexit supporters celebrated that the country will not become a colony of Europe. Thereby the pound was one of the most notable partygoers. The British currency shot up 1% against the euro and other currencies after a slight feint.

What now?
The British pound's notable rebound is fueled by the growing likelihood of Brexit delays or cancellations. The massive defeat makes it painfully clear that May will never be able to get the agreement through the House of Commons.

Leaving the EU without good agreements is not an option for her. In that scenario, Great Britain will end up in a recession and the financial damage could amount to €300 billion. Then 2 options remain open: a new referendum or clearly choose a side to get at least 1 of the 2 currents in her party.

Motion of distrust
Before it is clear what the route will look like, May first has to overcome a new hurdle. The future of the prime minister will be voted on on Wednesday, January 16 at noon. Opposition leader Jeremy Corbin filed a no-confidence motion immediately after the vote. It was supported by many members of the House of Commons: from Brexiteers to the Northern Ireland DUP party.

The way in which May will postpone or cancel Brexit with a new strategy is not a formality. The growing chance that it will not (yet) leave the EU on March 29, makes the pound one of the winners in the currency markets for the time being.

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.

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