What a day. The morning started sedately enough, as we all caught up on Brexit developments. Theresa May managed to get the Cabinet to support her Brexit withdrawal agreement and the pound was hovering around the $1.30 mark. Then Dominic Raab resigned as Brexit Secretary and a fresh wave of turmoil began. In his resignation letter, Raab said that he couldn’t support the proposal deal for two reasons. First, the regulatory regime proposed for Northern Ireland threatens the integrity of the UK and second, the indefinite backstop arrangement.
Before Raab quit, the Northern Ireland Minister Shailesh Vara resigned and after Raab quit, Esther McVey followed suit. The pound weakened sharply and was down by more than 1% against the euro and dollar. The weakening continued throughout the day and wasn’t helped by reports that 84 Tory MPs plan to vote against May’s deal. Jacob Rees-Mogg called for a no-confidence vote in Theresa May and expects many more letters to be sent to Sir Graham Brady, chair of the 1922 Committee (Conservative MP Henry Smith submitted his own letter later in the day). There is a very real possibility that May could step down from her role.
So, where do we go from here? We don’t know and we won’t pretend to. There are so many possibilities at present that it would take a brave person to say anything with any certainty. However, it does look as if May’s proposals will not get through Parliament which would mean a return to the drawing board. A no-deal Brexit is, once again, looking increasingly unlikely, although we could even see a general election and/or a second referendum.
UK retail sales fell 0.5% in October. The markets had been expecting a 0.2% increase, so the release was particularly disappointing. Balance of trade figures from the eurozone showed the surplus narrowed sharply to €13.1 billion from €25.3 billion in the same month the previous year/ Exports fell by 1% while imports increased by 6.4%. In the US, retail sales increased by 0.8% in October from 0.1% the previous month, beating expectations of 0.5%. Another release that appears to confirm the strength of the US economy.
Today there will be continued Brexit fallout and it will be interesting to see what happens to the value of the pound on the final day before the weekend. The recent levels of volatility really do help to cement the importance of getting a forward contract in place to lock in a single exchange rate. Otherwise, if you’ve got a big transfer coming up, you could find yourself scrambling for thousands of pounds. Speak to your Personal Trader on 020 7898 0541 to find out more.