Pound Strengthens as Poland offers May's Plan B a Boost, Grieve Moves to Suspend Brexit
Above: Former Attorney General Dominic Grieve will be seeking to table an amendment in parliament to suspend Article 50. Image (C) Foreign and Commonwealth Office.
- May to go back to Europe to rework Irish backstop
- Poland's Czaputowicz says 5-year time limit to Irish backstop an option
- Rebel MPs to detail plans to suspend Brexit altogether
- Pound-to-Euro exchange rate @ 1.1341
- Pound-to-Dollar exchange rate @ 1.2875
The Pound was the best performing major currency at the start of the new week thanks to a number of political developments that suggest to markets a 'no deal' Brexit will be avoided on March 29.
The chances of Prime Minister Theresa May's 'Plan B' Brexit deal succeeding increased after the Polish Foreign Minister confirmed he has proposed limiting the Irish backstop to 5 years in order to unblock the current Brexit stalemate in the UK parliament.
Jacek Czaputowicz told the BBC's Adam Fleming that he would be happy for the Irish backstop to be temporary and only last 5 years, and he has discussed the view with UK Foreign Secretary Jeremy Hunt and Irish Foreign Secretary and Deputy-TD Simon Coveney.
Furthermore, in an interview in Polish newspaper Rzeczpospolita, Czaputowicz says:
"If Ireland appealed to the EU to change the agreement on the backstop … so that it would apply temporarily, let’s say five years, the matter would be solved. Of course, this would be less beneficial for Ireland than an indefinite backstop, but much more favourable than the non-contractual Brexit, which inevitably approaches."
When asked whether "the EU has become a hostage of the attitude of the Irish government," Czaputowicz says, "in a sense, yes."
"Probably they thought that the United Kingdom would at some point agree to an indefinite backstop, which did not happen. And now we have a game of a coward, two cars are running on each other and we will have a frontal collision. As a consequence, Ireland will lose the most and it will be obliged to provide the EU external border, i.e. with Northern Ireland," says Czaputowicz.
The official line from the EU has to date been that the issue of the backstop will not be reopened; yet it is the backstop that is the single most significant block to the Brexit deal passing through the House of Commons with Conservative party MPs and Northern Ireland's DUP proving unwilling to vote for the deal owing to the backstop.
"I look forward to exploring in more detail the proposals that have been put forward by the Polish foreign minister on this particular issue of dealing with the backstop," May told parliament when asked about the comments.
Conservative website Guido Fawkes say Czaputowicz's plan "might just be enough to win over Parliament". "This may prove very important, or indeed may be squashed very quickly by the rest of the EU 27," says the BBC's Political Editor, Laura Kuenssberg.
The view from Czaputowicz gives Prime Minister Theresa May a clear line to pursue if she returns to the European Union looking for concessions that will allow the deal to be ratified by the UK, thus preventing a 'no deal' Brexit from taking place on March 29.
The development is certainly a positive one for Sterling which is tipped to benefit from the eradication of 'no deal' Brexit risks.
Pound Sterling is trading near recent highs against the Euro, U.S. Dollar and other major currencies at the start of a new week that promises to offer further political intrigue and Brexit anxiety.
The Pound's ongoing 2019 recovery is built on an emerging view that the prospect of a disruptive 'no deal' Brexit will be avoided as the parliamentary arithmetic and a fast approaching deadline make it all but certain the March 29 Brexit day will be pushed back further into the year.
Above: Sterling has recovered against the Euro in 2019 as markets believe it is increasingly unlikely a 'no deal' Brexit will take place on March 29.
May tells Parliament Further Consultations on Deal to Take Place
Whether or not Prime Minister Theresa May will be willing to pick up on the issues raised by Poland's foreign minister will be seen over coming weeks as we can confirm May will be heading back to the European Union seeking further changes to the Brexit deal in order to try and win the ratification of the House of Commons.
May has this afternoon told the House of Commons she will explore more ways to provide a mechanism by which the UK can exit the Northern Ireland backstop while confirming she will continue working with a host of different interest groups inside and outside of the Commons to find a way forward out of the deadlock.
On the question of ruling out a 'no deal' Brexit May says there are only two mechanisms to deliver such an outcome: 1) Revoking Article 50, which ultimately cancels Brexit and 2) Extending the Article 50 process, but this requires all 27 EU member states to agree to such an outcome, and May cannot guarantee this can be delivered. "You cannot wish away a no-deal," says May.
In a nod to those Labour Party parliamentarians that might be swayed to vote for the Brexit deal, May says she will look at making concessions on workers' rights and engaging trade unions.
"The Prime Minister’s 'Plan B' is remarkably similar to 'Plan A', which Parliament rejected less than a week ago, so it doesn’t appear to change the near-term outlook for the economy. In that regard, votes on amendments to 'Plan B' on Tuesday 29th will probably be more important," says Andrew Wishart,
UK Economist at Capital Economics.
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It Still Comes Down to the Irish Backstop
A report in the Sunday Times gives us a hint of the trajectory the Prime Minister might take on solving the Irish backstop issue. May could seek to offer a bilateral treaty to Ireland to prevent a hard border between the North and the Republic, thereby removing the backstop from the Withdrawal Agreement.
With the threat of the backstop removed it is May's hope that the DUP and the majority of Conservative party MPs opposed to the Brexit deal will be swayed.
However, we are wary of a rejection from the European Union on the matter: they have said the Withdrawal Agreement is not for opening and May's plan requires them to come back to the negotiating table.
"The GBP may be trading dangerously on fumes and we’d continue place a larger emphasis on the EU’s demeanour and responses instead," says Emmanuel Ng, a strategist with OCBC in Singapore.
MPs will Attempt to Suspend Brexit
But Theresa May isn't the only game in town today with those opposed to Brexit in the House of Commons likely setting out their plays to push for a 'soft' Brexit, or no Brexit at all.
Indeed, The Sunday Times also reports MPs will today, "unveil their plan to hijack the agenda of the Commons to suspend article 50."
According to reports, there are two amendments that will be presented for debate on January 29, they will both seek to allow back-bench MPs to seize control of House of Commons business and force through their own legislation - an unusual manoeuvre seen by some as a constitutional "coup".
One group, led by Nick Boles and Yvette Cooper, will attempt to outlaw a 'no deal' Brexit.
A second group of more than 20 MPs led by Dominic Grieve is however said to be aiming to suspend Article 50 - the legal process that will allow the UK to leave the EU on March 29.
Their plan would need the support of 300 MPs - not even a majority - as long as they came from five different parties. Only 10 Tories would have to approve, making it all but impossible for May’s team to thwart the plot.
The European Court of Justice last year ruled that the UK can unilaterally cancel Brexit by withdrawing Article 50, it could be that this group of Remain-leaning MPs will want to achieve this.
However, we don't believe Labour will back this Grieve amendment as it would effectively signal the party's abandonment of Brexit. We therefore see the Boles-Cooper amendment having more chance of success as avoiding a 'no deal' Brexit is something Corbyn's party can unite behind.
Remember, the rule of thumb for the British Pound is that any move away from a 'no deal' Brexit is positive, therefore these moves are, on paper at least, positive for the currency.
However, we have serious concerns about the health of UK politics going forward if these attempts by MPs to thwart Brexit come to pass as they appear to us to fly in the face of the EU referendum outcome and could therefore have negative implications for the currency longer-term.
It must also be emphasised that it is not clear whether any of the amendments being discussed have the ability to actually stop a 'no deal' Brexit from taking place on March 29. According to the BBC's Reality Check correspondent Chris Morris, the most obvious way to stop a 'no deal' Brexit, or any form of Brexit, is to revoke Article 50. "The other way to avoid a no-deal Brexit in the short term is to play for time and extend the Article 50 period. The government would need to propose that and MPs would have to approve it."
Indeed, arch-Brexiteer Jacob Rees-Mogg this morning tells radio station LBC that he is not particularly worried that parliament can derail Brexit and that a revised deal still remains the most likely outcome at present.
"I think if you were to rank them the most likely is no deal, the second most likely is a redone deal, third is a delay, and fourth a long way behind is not leaving at all," says Rees-Mogg, Chiarman of the European Research Group, a group of pro-Brexit Conservative party MPs.
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