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Pound Sterling Still at Threat from Parliamentary Moves Government Brexit Strategy

- PM avoids damaging "meaningful vote" defeat through new concessions.
- PM to discuss amendment handing control of negotiations to parliament.
- Vote kicks threat to government stability out into the long grass again.

© Lee Goddard / Number 10 Downing Street

The Pound won a moment's respite late Tuesday when MP's rejected the so called "meaningful vote" amendment to the EU Withdrawal Bill, which seemingly kicks any threat to the stability of the government out into the long grass, but the next challenge to Prime Minister Theresa May's leadership and the government is already looming over Sterling.

The House of Commons rejected the "meaningful vote" amendment to the withdrawal bill by a majority of 26, with 324 votes against the amendment, and 298 in favour of it. Similarly, the House of Commons also defeated an attempt by some government and opposition MPs to remove the "exit date" from the withdrawal bill.

Former Attorney General Dominic Grieve, who tabled the so called meaningful vote amendment, told Sky News the Prime Minister has offered "discussions" over the amendment and possible changes to the EU Withdrawal Bill at a later date.

Grieve's amendment seeks to give parliament the power to send PM May back to the negotiating table in Brussels if it is not happy with the final deal that has been agreed. It also seeks to hand the negotiations over to parliament after February 15 2019 if a deal has not been agreed by that time. 

The amendment's failure heads off an imminent threat to the stability of the government and may support Sterling over the medium term if the forthcoming discussions do as some analysts think it will and hampers the government's efforst to take the UK out of the European Union. 

"Overall, the latest developments are supportive for the pound. Firstly, May has avoided an embarrassing defeat on Brexit legislation which could have further undermined her authority. Secondly, it appears that the risk of a more disruptive “No deal” Brexit outcome has diminished further. Parliamentary pressure will remain in place to soften the Brexit outcome," says Lee Hardman, a currency analyst at MUFG.  

Robert Buckland, the current attorney general, appeared to confirm earlier claims by Sky News when speaking with the BBC's Laura Kuenssberg.

"When I asked him tonight what had really been agreed, he was crystal clear that there has been no assurance or guarantee that the government will actually make a change to its plans, just a commitment to "further discussions" to try to find a way forward that may well result in a tweak - such as a new amendment," Kuenssberg says.

Parliament will vote on another series of so called "Brexit wrecking" amendments later on Tuesday, some of which seek to commit the government to remaining a member of the EU single market and "a customs union", while another aims to steer the UK toward membership of the European Economic Area.

All of these amendments would see the UK's international trade arrangements continue to be dealt with from Brussels while keeping parliament and UK courts subject to a vast body of EU law as well as bound by all future legislation. Single market or EEA membership would also mean a continuation of "freedom of movement". 

"Winning a battle does not mean that the war is over after all, in particular if the next battle is imminent. Further amendments to the Brexit bill will be discussed today; but even after that I still do not see a clear path that will satisfy both sides of the party, the Brexiteers and the Remainers, sufficiently so as not to topple the government and that will also seem acceptable to the EU," says Esther Maria Reichelt, an analyst at Commerzbank.

The UK electorate voted by a majority of 52% in June 2016 to leave the European Union after a months-long and bitterly fought campaign. Since then both the UK Labour Party and Conservative Party have made manifesto commitments to delivering the outcome of the vote.

The remain-supporting opposition Labour Party has since beaten a retreat from its earlier position and is now attempting to force government into keeping the UK inside of the EU customs union and single market.

Meanwhile, the remain-supporting Conservatives are increasingly divided over whether to follow a similar path, although the threat of rebellion from a minority contingent of Brexit-supporting MPs within the party has so-far prevented government from making an overt commitment to a change of policy.

PM May's Conservatives have "confidence and supply" arrangement with Northern Ireland's Democratic Unionist Party that affords them a narrow majority of just 10 votes in the House of Commons. So each and every vote counts when it comes to key pieces of legislation. 

However, a fluctuating group of between six and 15 Conservative MPs including Dominic Grieve have frustrated the government's efforts to withdraw the UK from the institutions that make up the European Union. 

The Pound was quoted 0.29% lower at 1.3334 against the US Dollar Wednesday while the Pound-to-Euro rate was 0.42% lower at 1.1334. However, both exchange rates had risen notably during the overnight session after the outcome of Tuesday's parliamentary votes became known. 

 

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