Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The pound is in the eye of a big political storm this morning, after Brexit took another dramatic and surreal twist yesterday.
Theresa May’s decision to postpone the parliamentary vote on her Withdrawal Agreement wiped two cents off the pound yesterday, sending it reeling to a 20-month low.
It’s not managed much a recovery overnight, and is bobbing around $1.257 – 15% below its value before the referendum in June 2016.
So City traders who had been expecting drama tonight are instead looking nervously at Westminster, wondering exactly what is going on.
Lukman Otunuga, research analyst at FXTM, says the pound is “in trouble”, as Theresa May heads to Brussels in search of a better deal (although the EU insists it won’t reopen the package).
As the week progresses markets will be keeping a very close eye on whether May has the ability to renegotiate with Brussels in a bid to save the deal, if she will end up facing a leadership challenge, or the possibility of a second Brexit referendum.
With the chaos in Westminster raising the likelihood of a no-deal Brexit scenario, the British Pound is in trouble.
Already this morning, several opposition leaders have written to May, accusing her of showing contempt for Parliament over pulling the vote. They also want to know whether the previous deadline of of 21 January for the vote still applies.
Meanwhile, May’s critics within her own party are renewing their push to overthrow the PM. Steve Baker, a former Brexit minister, wants fellow MPs to send in letters of no confidence – they need 48, and are someway short right now.
Paul Mumford, fund manager at Cavendish Asset Management, predicts that the pound will remain jumpy in the next few weeks:
Mrs May has postponed the vote to seek further assurances on the back stop agreement whilst others may want a renegotiated back stop or in a best case a complete removal. A hard exit would inevitably mean a hard border with Northern Ireland, which is likely to make life difficult moving forward with the potential for a complete and damaging reversal of the Good Friday agreement.
The priority is now to get some sense of what MP’s from all sides of the house will accept before May can attempt to broker a further solution. With so much noise and confusion on the subject, investors and markets are in a state of possible lock down as we await further clarity and a majority of opinion.
Further market uncertainty and rumours on Brexit will dictate swings in the market, and as liquidity begins to dissipate ahead of Christmas then movements will continue to be volatile.
Also coming up today
New unemployment data will show whether UK workers are suffering from the Brexit uncertainty. Economists predict that wage growth was unchanged last month, at 3.2%, and that the unemployment rate stuck at just 4.1%.
Bloomberg are holding a day-long conference on “Global Regulatory Forum Agenda”. That may not sound as exciting as Brexit, but it’s important stuff — asking whether we’re ready for the next crisis.
The agenda:
- 9am GMT: IMF deputy MD David Lipton speaks on financial regulation
- 9.30am GMT: UK unemployment statistics
- 10am GMT: German ZEW survey of economic confidence
- 2pm: Chancellor Philip Hammond speech: Spreading the benefits of financial markets globally