Pound Sterling Bounces as Parliamentary Resistance to New Brexit Deal Melts

Pound up on Commons developments

Above: Prime Minister Johnson gives a statement to the House of Commons detailing his latest Brexit plans. Still courtesy of Parliament TV.

- Key Brexiteers appear willing to back new plan

- Sterling in strong gains as markets price in increased odds of a deal being passed

- But, Ireland & EU Parliament express opposition to proposals

The key opponents to former Prime Minister Theresa May's Brexit deal appear ready to back the new deal being sought by Boris Johnson, and markets are betting this markedly raises the prospect of a Brexit deal being struck.

As a result, the Pound is moving higher against its major competitors, with the Pound-to-Euro exchange rate trading up 0.6% at 1.1291, the Pound-to-Dollar exchange rate is up 0.62% at 1.2379.

However, we would fully expect any upside potential in Sterling to be limited until such a time as the EU indicate they are ready to accept the proposals made by the UK as the basis of a fresh deal.

Johnson recommended his proposals to the House of Commons on Thursday in a statement, and the response by a number of key figures has been key we fell as they indicate that the House could finally pass a deal based on these proposals.

So-called Brexit 'spartans' - those Conservative MPs who voted against May's deal three times - such as Bill Cash, Steve Baker and Marc Francois indicated they could support a deal based on the current proposals in their questions to Johnson.

"We now glimpse the possibility of a tolerable deal," Baker, who heads up the Conservative's Eurosceptic European Research Group said.

Johnson said there was momentum behind the proposals but he was "not going to pretend this is a done deal."

Going some way in corralling support for the Prime Minister would have been the consent to the proposals offered by Northern Ireland's DUP who were also resistant to May's deal.

It was always a case that the DUP's stance on any deal would unlock support from other Eurosceptic MPs.

Furthermore, a number of independent MPs who lost the whip of the Conservative Party after voting against the Government in September, have indicated they too would vote for a new deal.

At the very least, Johnson needs his entire party, former Conservatives, the DUP and some opposition MPs to back his deal to get it across the line.

Those with a handle on then mathematics in Parliament suggest the numbers are starting to stack up for the Prime Minister, and this we see as being supportive of a recovery in Sterling on a sustainable basis.

BuzzFeed News' Alex Wickham is keeping a rolling list of all the MPs who rejected May's deal at the third meaningful vote but are now indicating they would vote for Johnson's plan:

  • Priti Patel (Con)
  • Theresa Villiers (Con)
  • Steve Baker (Con)
  • John Redwood (Con)
  • James Duddridge (Con)
  • Ranil Jayawardena (Con)
  • Mark Francois (Con)
  • Ruth Smeeth (Lab)
  • Gareth Snell (Lab)
  • Stephen Kinnock (Lab)
  • Melanie Onn (Lab)
  • Gregory Campbell (DUP)
  • Nigel Dodds (DUP)
  • Jeffrey Donaldson (DUP)
  • Paul Girvan (DUP)
  • Emma Little Pengelly (DUP)
  • Ian Paisley (DUP)
  • Gavin Robinson (DUP)
  • Jim Shannon (DUP)
  • David Simpson (DUP)
  • Sammy Wilson (DUP)
  • John Baron (Con)

The Times reports that as many as 20 Labour MPs could back Johnson’s deal, adding that if he succeeds in rallying 15 of the spartans on board, he will enjoy the support of 340 MPs - giving him a majority of 20.

We have argued for some time that key to unlocking a sustained recovery in the British Pound is the sealing of a Brexit deal, as this is the single most effective route to dealing with the UK's chronic political divisions while offering businesses much required certainty to start investing again.

Of course, what gets put in front of Parliament will ultimately depend on whether the EU signs off on the proposals forwarded by Johnson.

The EU have been careful not to reject the plans outright, but they are certainly not ready to rubber stamp them.

Ireland's Taoiseach Leo Varadkar has said in a press briefing in Sweden that the proposals in their current form are unacceptable, but that they do form the basis of future negotiations.

The European Parliament's Brexit Steering group has said UK proposals are "not a basis for an agreement to which the European Parliament could give consent... the proposals fall short and represent a significant movement away from joint commitments and objectives."

The danger is that the EU push back to such a degree that Johnson starts losing the support of freshly-won MPs.

There is a fine line to be navigated here, but so far Sterling is enjoying developments. There is some way to go yet and we fully expect the currency to remain prone to headlines and exposed to two-way risk.

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