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– The pound trades down in the mid-week interval
– Parliament increases its powers to counter Brexit "without agreement"
– Shock as a service sector is heading towards contraction according to the latest data
The pound could be protected from a significant weakness on the new measures adopted by British parliamentarians to avoid a "non-agreement" Brexit to be held in March 2019, however we expect the currency to maintain a soft subtlety before the Brexit's decisive vote. 11 December due to uncertainty rooted in prospects.
The moves of a former prosecutor general and a rebellion by a group of conservative party MPs means that the parliament has more say in what the government does when it loses the December 11 vote on the Brexit agreement by Theresa May.
Dominic Grieve, a conservative deputy who served as an attorney general for four years, approved his amendment to let parliamentarians have more say in the Brexit plans if the prime minister's agreement was defeated in Parliament next Tuesday.
26 Conservative MPs voted against their government ensuring that the amendment passed from 321 votes to 299.
In addition to potentially linking the Prime Minister's hands to the next steps for Brexit, it reduces the chances that the UK will leave the EU without an agreement as it confirms that there is a majority in the House of Commons that would vote to prevent a " nothing "& # 39 ;.
For the British pound, this is important as a "nothing" could lead to a disruptive Brexit. The Bank of England its scenario analysis suggests that the pound could fall as high as 25% in the event of a worse disruptive Brexit scenario.
The move also raises the possibility of a no-Brexit outcome as there is an assumption that the hands of the rest in parliament have been reinforced by the Grieve amendment.
Economist Malcolm Barr a JP Morgan today he says to customers that he believes that the possibility of no-Brexit has risen to 40%, from the previous 20%.
"The United Kingdom now seems to have a chance to unilaterally revoke and take a period of time to decide what will happen next", writes the economist J.P. Morgan Malcolm Barr in a note to customers.
He places a 10% chance on a Brexit without agreement, down by 20%, and a 50% chance on an ordered Brexit, down from 60%.
While the displacement of the shares should have been a relief for the pound, the currency is actually still seen trading family territory.
We are not surprised by the inability of the currency to get a significant boost from the news, as chronic levels of uncertainty remain on the way in which the country is headed.
No one in the UK parliament holds the majority required to see their vision of Brexit pass while the government does not intend to deviate from its course at this stage.
For currency markets, a wait-and-see pose could be adopted.
In fact, while there seems to be a majority in the House of Commons to prevent a "non-agreement", Grieve himself says that his amendment "does not mean that a Brexit without agreements is off the table".
The exchange rate between the pound sterling and the euro is quoted at levels consistent with expectations of persistence of uncertainty: 1 GBP buys EUR 1,1206 on interbank markets at the time of writing, ensuring that negotiations are approaching the minimum of several months to 1.1180 reached Tuesday.
High Street banks offer exchange rates between 1.0910 and 1.10 for international payments and transfers, while independent suppliers are quoted in the 1.11-1.1130 region.
The exchange rate from pound to dollar is quoted at 1.2692 on interbank markets, the pair seems heavy and intent on testing the 2018 low at 1.2626 early.
Banks offer exchange rates between 1.2350 and 1.2439 on international payments, while independent suppliers offer between 1.2580 and 1.26.
What happens after the May government lost the Brexit vote on December 11th is very uncertain, with a series of possibilities on the table.
"The pound is on the ropes and looks set for further falls, as it seems almost entirely certain that Theresa May's government will fall in. A vote of no confidence and new general elections now seem certainties after a humiliating day in parliament. no-deal plummets into the distance, but at the same time the momentum behind a second referendum is building, "says Markets.com Chief Market Analyst Neil Wilson.
However, we believe that the most probable result would be a second vote put on the table; we imagine that the government can try to get a further movement from the European Union on the deal (the political declination could be further negotiated, the withdrawal agreement is still closed to negotiation).
The bill could be a good opportunity to broadcast its second screening, especially if the "Brexiteer" field realizes that their preferred "no agreement" plan has little chance of bringing the majority and the whole project Brexit is at risk of bankruptcy if you do not "t support the government.
"In short, this looks like a lot of short-term problems for GBP with a high risk of long-term damage (no exit), but with a growing possibility of long-term salvation from a second referendum, which Remain would bring. it's the mantra for the pound, "says Wilson.
Shocked because the UK economy slows abruptly before the end of the year
The IHS Markit The SME service for November was released mid-morning and read at 50.4; a few steps from figure 50 that marks the watershed between expansion and contraction.
The markets expected a more optimistic reading of 52.5, the result is even more surprising as the manufacturing and construction sectors gave positive surprises to the upside at the beginning of the week.
According to IHS Markit, commercial activity and new incoming work have increased at the weakest rates for almost two and a half years.
The data are a bad omen for the British economy at the end of the year as the service sector accounts for over 80% of the UK's economic activity.
Reports from survey respondents suggested that consumption dynamics and consumer spending held back growth in November. A number of companies reported to IHS Markit which accentuated the uncertainty of Brexit led to delays with customers' business investment decisions.
There is also a potentially polluting effect on the employment dynamics in the United Kingdom contained in the report. A more gentle growth in demand and an increase in staff salaries contributed to more cautious recruitment policies in November. The last increase in the number of employees was only modest and the weakest recorded for four months.
"With minimal optimism for the future since July 2016 and minimal hiring, the UK's main economic driver seems to have stood still when it gets too close to the brand without changing its comfort. that the root cause of this slowdown must be firmly placed on the shoulders of the Brexit indecision, "says Duncan Brock, Director of Institute of procurement and supply, who sponsors the relationship.
Meanwhile, service providers' optimism regarding the outlook for the current year for commercial activities has returned to moderate in November.
There was little impact on the value of the pound sterling, which is understandable as the markets remain almost exclusively focused on the Brexit dispute in the British parliament.
If nothing else, the bad data could be good for the pound if it galvanized the parliament in the vote on Prime Minister May's Brexit agreement.
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