The Pound Sterling Live: Retreating from Euro and Dollar after DUP Stands Firmly against May's Deal and Parliament Fails to Find a Majority

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- Boris Johnson et al follow Rees-Mogg, back May's Brexit.

- PM pledged resignation for votes on Brexit agreement.

- But DUP remains opposed, and Speaker says "no" to vote.

- Opposition, government rebels seize control of Commons.

- Votes on "permanent customs union", other ideas all fail.

- May's agreement is still "GBP positive" say RBC and MUFG. 

The Pound retreated from rivals Wednesday after parliament failed to find a majority to break its Brexit deadlock and as the Democratic Unionist Party (DUP) appeared to squash hopes the government could be close to having a majority in the House of Commons that will support the EU Withdrawal Agreement.

Significant numbers of MPs have indicated they will now back Prime Minister Theresa May's withdrawal agreement for fear of losing sight of the exit door entirely, including former foreign secretary Boris Johnson.

However, a large number of MPs still oppose the agreement and Democratic Unionist Party (DUP) of Northern Ireland is so-far unmoved in its opposition to it. The withdrawal agreement will set the stage for negotiations on the future relationship so a change of Prime Minister would not address its deficiencies.

If the House of Commons does not pass the bill this week the UK will receive an Article 50 extension that runs only until April 12, at which point MPs will choose between a so-called no deal Brexit and a much longer extension that would require participation in EU elections while politicians establish a way forward.

Brexit Secretary Steven Barclay said Wednesday the government intends to table a motion for parliament to sit on Friday. Markets had been speculating that PM May would put her withdrawal agreement to a third vote in the House of Commons again before the week is out.

That announcement came just a short time before PM May appeared before the 1922 Committee of back-bench MPs, where she is reported to have offered to resign after her EU Withdrawal Agreement makes it through the House of Commons, in exchange for support. 

BBC News political editor Laura Kuenssberg has the following to add;

The House of Commons Speaker has since said he will not allow the government to have another vote unless the withdrawal bill passes his test of whether it has meaningfully changed since it was last put before Parliament.

It's not yet clear whether the government will be able to navigate around that intervention, which was met with cries of foul and condemnation from government quarters, although another apparent attempt by the Speaker to frustrate the government's Brexit strategy failed on Wednesday.

Opposition and Conservative Party MPs seized control of Wednesday's Commons agenda to vote on amendments in a maneuvre that was billed as enabling them to reveal what their preferred route forward with the EU would look like. 

However, none of the amendments were able to command a majority in the House of Commons on Wednesday, including those canvassing support for a "permanent customs union" and another referendum.

Above: Pound-to-Euro rate shown at hourly intervals.

The Pound-to-Euro rate was -0.15% lower at 1.1701 following the parliamentary results, after reversing an earlier 0.34% gain. It's up 5% for 2019.

"We note that EURGBP is looking increasingly vulnerable to a squeeze higher if today's "indicative votes" do not manage to indicate any workable solution to the ongoing Brexit debacle," says Mark McCormick, head of fx strategy at TD Securities.

The Pound was quoted -0.41% lower at 1.3158 after reversing an earlier 0.14% gain. All Sterling exchange rates have been volatile in 2019, but particularly during the month of March. 

"It looks like MV3 (the third vote on May’s deal) will come on Thursday or Fri. The govt idea is that once Brexiteers see the direction Parliament is going (something softer than May’s deal), they will be forced to concede that her deal is better than the alternatives. The DUP does not seem to be there," says Elsa Lignos, head of FX strategy at RBC Capital Markets. "Markets have treated her deal as GBP-positive and that should still be the case."

Above: Pound-to-Dollar rate shown at hourly intervals.

"The shift from Jacob Rees-Mogg and it seems Boris Johnson is being reported as not in itself enough to swing large numbers from the ERG. Still, we should not underestimate the potential importance of this development in substantially lifting the prospect of May’s deal finally getting over the line," says MUFG's Louw.

Prime Minister Theresa May needs 320 votes in favour of her EU Withdrawal Agreement in order to guarantee it a majority in the House of Commons but she only has 316 voting MPs in parliament and 10 DUP votes to rely on if she can convince them to back the agreement.

PM May's exit plan was rejected by the House of Commons for a second time on March 12, by a majority of 149. PM May has since said it won't be put before the house again unless the government can be confident it will pass. It's far from clear whether she will able to get the numbers. 

The previous Withdrawal Agreement vote resulted in a record-breaking landslide of opposition to what is the government's signature piece of work. 432 MPs voted against the bill on January 15, with only 202 in favour of it, making for a rejection by a majority of 230 votes. 

Above: House of Commons votes for and against EU Withdrawal Agreement, March 12, 2019.

 

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