Key takeaways
PM Theresa May and the EU have reached a (technical) agreement on the UK's withdrawal from the EU.
We still do not know the exact content of the deal but according to media reports the backstop will be UK-wide although Northern Ireland has to stay aligned with most EU single market rules.
The UK Cabinet will meet today at 15:00 CET to discuss the draft text and whether they can support it or not. This is hard to say given the comments from key Cabinet members over the past couple of days/weeks.
If both the UK Cabinet and the EU say yes to the deal, the EU will most likely call for an extraordinary Brexit summit later this month (25 November has been suggested)
We think the real test is whether it can pass the UK House of Commons. Leading Brexiteers and Theresa May's supporting party DUP have already said they will vote against the deal. Moderate Conservative and Labour MPs are key for PM Theresa May.
The date for the vote in the House of Commons is suggested to be 10 December assuming the Cabinet gives it the nod.
The fact that we do not know the responses from the UK Cabinet, EU leaders and not least whether a majority in the House of Commons can support the deal explains why the GBP strengthening was only to a limited extent. This also means that the renewed Brexit optimism may fade again in the very near term, sending EUR/GBP higher. GBP is likely set to stay volatile.
When we get more clarification that there is support for the deal - and again, most importantly whether it has support in the House of Commons - the GBP should appreciate more. We forecast EUR/GBP at 0.84 in 3M (NYSE:MMM). For more see Corporate Hedger: Strong November could turn to cold December for GBP, 13 November.
To read the entire report Please click on the pdf File Below.