How are Brexit fears impacting the FX market?
Is Brexit affecting the GBP?
The prospect of a no-deal Brexit has come back to cause ongoing worry and has subsequently created volatility in the financial markets.
Europe and Britain relations are tense with ultimatums proposed on both sides, urging a deal to be made by the 15th October, if not Prime Minister Boris Johnson could be walking away with no deal completely.
What has caused ongoing Brexit fears?
Any form of Brexit agreements has been dishevelled last week when Britain proposed new legislation that would break international law. The legislation that could come into effect would breach the parts of the Withdrawal Agreement that was made in January 2020.
The bill put forward is called the Internal Markets Bill and has since caused a stand-off between Northern Ireland and England. Post-Brexit, the UK government wants to continue with having a joint market across the four nations, England, Wales, Scotland and Ireland. The internal bill will allow anything approved for sale in Scotland or Wales to also be good for sale in England or Northern Ireland.
As this has breached the existing withdrawal agreement, the EU has now given Britain three weeks to change and amend the legislation. With this looming over Prime Minister Johnston, peace seems to be disturbed as a Tory revolt is said to have occurred in Parliament over the bill.
Criticism has been flooding in from ex-Tory-leaders but Prime Minister Johnson has stood his ground claiming that the bill is a necessity in ‘ensuring the unfettered access for goods from Northern Ireland to the rest of the UK’, as reported by Sky News.
Internal Bill Vote
On Monday, former cabinet ministers and attorney generals withheld support for the passing of the Internal Bill legislation. The tory revolt led to 30 of the party’s MPs abstaining from the vote, some not attending all together and even two who voted against. However, the act still managed to pass with a majority of 77 votes. In the end, the verdict was 360 votes to 263.
In the upcoming week, all eyes will be on the vote around the amendment proposed by Conservative chair of the justice select committee, Bob Neill. This particular amendment has been favoured and encouraged by some MPs over the Internal Market Bill.
Downing Street’s Compromise
After various complaints from Tory rebels, the government arrived at a compromise this week. However, nothing changed in regards to the Internal Bill going forward, instead, there will be an added check allowing Parliament to vote in order to stop ministers using any of the powers they want to put into effect.
This essentially means that the government still wants to proceed with amending the agreement initially made with the EU.
As a result of this, the Sterling has had its worst week in six months on the FX markets, this could be down to doubts on the chances of a Brexit deal being made by the end of December. The GBP was the worst-performing major to both the USD and JPY. The GBPUSD tumbled 3.41% and the GBPJPY plunged 3.43% during the past week. If the U.K does, in fact, walk away without a deal then sterling could become a whole lot cheaper.