This morning, the pound has weakened as it was announced that the government will add a new clause to the Brexit bill to make it illegal for Parliament to extend the process beyond the end of next year. The December 2020 deadline to negotiate a trade deal with the EU was originally a flexible one, however the government will now attempt to make it a hard deadline. This could, therefore, make a no-deal Brexit a possibility, which may not bode well for the pound.
After a strong start to the day yesterday, the pound lost some of its gains in the afternoon. It was confirmed that MPs will vote on the Prime Minister’s Brexit bill on Friday. This will take place after the Queen has formally opened Parliament on Thursday and sets out the government’s legislative programme.
If passed through in time, the Withdrawal Agreement Bill will enable to UK to leave the EU on the 31st of January. After this, Boris Johnson will have to enter negotiations on a trade deal with the EU, which he has promised to have ratified by December 2020.
Yesterday, Manufacturing PMI dropped to a four-month low to 47.4, missing market expectations of 49.3. Services PMI also dropped slightly in December to 49, as did Composite PMI, which is a weighted average of the Manufacturing Output Index and the Services Business Activity Index. Companies attributed lower business activity to a combination of domestic political uncertainty, a lack of clarity in relation to Brexit and subdued global economic conditions.
