Home » Currency Note » Currency Note » May unwilling to keep UK in customs union

A day after Theresa May suffered the heaviest Parliamentary defeat of any British prime minister in the democratic era, the prime minister faced another vote in the form of a no-confidence motion tabled by Jeremy Corbyn. May was always likely to win the motion, given that she had the backing of the DUP and Tory MPs, and so it proved. She won the vote by 19 which just goes to show how important the DUP’s support is – their ten votes would have swayed it the other way. Still, the result offers no clarity on what will happen next.

Throughout yesterday, it appeared that May was pressing ahead with her Brexit plan, despite suffering the biggest Parliamentary defeat in the democratic era. She has already ruled out a customs union before cross-party talks even begin. In the morning, Andrea Leadsom confirmed that Jeremy Corbyn would not be invited to cross-party Brexit talks. However, May rowed back on that and invited him shortly after the no-confidence vote. He declined, saying he would only talk if no-deal was taken off the table.

As it stands, Parliament is in a bit of a stalemate. The fact that those in favour of no-deal and no Brexit both see Tuesday evening’s result as their success shows how difficult it is to predict what will happen next. That is one of the chief reasons that sterling’s movements have been so muted – the City simply does not know whether May’s defeat is good or bad news for the UK.

Today we can look forward to further Brexit-related drama, as May now has until Monday to present an alternative to Parliament following the passing of an amendment put forward by Dominic Grieve last week. One thing to note is that because May defeated the no confidence motion the Conservative Party put forward, she cannot be challenged again until December 2019. That means the only way she will leave now is if she resigns.

Today we will see December’s inflation rate from the eurozone, which is expected to drop to 1.6% from 1.9% the previous month, and we will also see November’s construction output figures. In America, we have initial jobless claims up to 12 January 2019. We are putting the finishing touches to our currency forecasts now that we know the result of the vote on May’s Brexit plans. Watch this space for future updates.

Remember, there is still plenty of time before the UK is set to withdraw from the EU (and the deadline might yet be extended). We encourage you to get in touch with your Personal Trader on 020 7898 0541 to find out how to protect future budgets from sudden exchange rate movements, including a forward contract.

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