GBPUSD is currently trading around 1.3074 in the US session Monday, jumped almost +0.45% on hopes of delayed smooth Brexit amid lingering political chaos. There was a report that the British PM Theresa May is likely to go to Strasbourg/EU later to tell her narrative in a “polite way, what's going on” at the moment with the British lawmakers/politics. But this story is not confirmed by the UK PMO officially either. GBPUSD made a session high of 1.3096 on hopes and hypes of delayed smooth Brexit. GBPUSD made a low-high of 1.2948-1.3286 in March and slumped almost -1.40% (till now) against +3.97% surge in the prior three months (Dec-Feb).
The report suggested that Theresa May will try to clinch a last-minute concession with Juncker under Brexit “cliff-edge” fear-mongering in a last ditch desperate effort. There are reports of some kind of deal in the offing over alternative arrangements. Although nothing confirmed yet, there are signals May could be bringing something new (good news) to the Commons for Tuesday’s “meaningful/meaningless” vote.
The Irish Foreign Minister said: “Brexit negotiations are ongoing, understands that the UK PM to travel to Strasbourg tonight seeks to finalize an agreement, but there are still obstacles in negotiations and the withdrawal agreement cannot be changed. We don’t yet have clarity on negotiations, but talks are ongoing. We want to be helpful and still regards no deal Brexit is unlikely. The EU will not compromise on core issues in trying to ease the UK concerns on Irish border backstop. The EU is trying to put a package together to provide the UK parliament with the reassurance they’re looking for”.
The German Chancellor Merkel has welcome the EU commission’s proposals for legal clarity on backstop Brexit talks and said EU’s Juncker has made an important offer to the UK on Brexit. The EU’s Dombrovskis said: “getting a Brexit deal is less destructive to both sides”. The German Finance Minister said: “Everyone in Europe is preparing for a deal and a no deal Brexit”.
Earlier GBPUSD stumbled on fading hopes of a smooth Brexit as Tuesday’s proposed “meaningful” Parliament vote may turn into another “meaningless” vote:
Earlier GBPUSD was trading around 1.2985 in the EU session early Monday, slips almost -0.22% on fading hopes of a smooth Brexit as Tuesday’s proposed “meaningful” Parliament vote may turn into another “meaningless” vote. There was a report that the British PM May “may” change Tuesday's vote from “meaningful” to “provisional” or rather than “meaningless” vote. The EU chief negotiator Barnier said Brexit talks now between the UK government and MPs.
Earlier there was a report suggested that May is now plotting with senior aides to find a way to turn what is an imminent Parliament defeat tomorrow to something more significant. The change from a meaningful vote to a provisional one means more and more uncertainty as she will be adding some caveats to the Brexit deal by proposing changes (that she may not get) to be added to it and then putting the whole thing to a vote. GBPUSD slips to a session low of 1.2960 on the concern of further Brexit chaos.
With just 18 odd days to go for the “Brexit moment of truth”, there are no signs of Brexit truce or compromise on the Irish border backstops or the actual thorny issues of Irish border and Theresa May is also not prepared to ask for an extension of the Article-50.
But GBPUSD bounced back above $1.30 after a UK lawmaker Cooper said the British Parliament will wrest control of Brexit if PM Theresa May fails to find a consensus. Cooper said she would seek to force Parliament to hold votes on no-deal and Brexit delay if the government decides not to hold them.
As per reports, Brexit talks were deadlocked as Theresa May has no plans as yet to jump in her “Royal Airforce-1” to go to Brussels for a last-minute concession (miracle). The UK PM May is now weighing up various options for a vote on Tuesday.
Theresa May's spokesman said “No plans at the moment for the PM to travel to Brussels and no change in government position towards second Scottish independence referendum. The PM spoke to European Commission President Juncker. The PM (May) is focused on getting on with Brexit, spoke to several EU leaders over the weekend”.
“The PM May thinks there remains a desire in both sides for the UK to leave the EU with a deal. The PM Theresa May is committed to holding the three Brexit votes this week still holds true and May said Brexit talks with the EU are continuing, focused on making progress to secure the UK parliamentary approval. The Brexit meaningful vote will take place on Tuesday; the UK government will publish motion later today, cautions against speculation as to what the motion will be”.
As per the further report, the British PM Theresa May had phone calls with 8-EU leaders over the weekend - including Merkel, Macron and also Juncker last night. But still, there is no breakthrough. Talks are ongoing, but not at the political level and even senior UK officials aren't there. The UK PM is focused on getting on with Brexit; spoke to several EU leaders over the weekend and thinks there remains a desire in both sides for the UK to leave the EU with a deal.
The EU Commissioner Schinas assured the EU and the UK will remain in close contact this week and the EU has made new assurances that backstop is temporary. The EU is open and willing to meet the UK negotiators at any time.
The British PM Theresa May is looking for last-minute concessions from the EU leader to keep her Brexit deal alive when Parliament votes this week. Meanwhile, increasingly “lonely” Theresa May is trying to win more pro-Brexit MPs over to the deal with fear-mongering warnings that a defeat could lead to no-Brexit at all.
The strategy here is that if the UK Parliament can get behind May’s modified plan, then she at least stands a fighting chance in going back to Brussels to secure a last-minute Brexit deal - with EU leaders conceding and offering her the needed concessions - at the EU Summit on 21-22nd March. Theresa May is still trying her “fear-mongering” strategy for a “cliff edge” Brexit (no-deal) on both the EU leaders and her opponent UK lawmakers in order to clinch a last-minute Brexit (Irish backstop) deal, acceptable by both sides.
But still, it’s a high-risk game right now as time is too short. Ireland’s PM Varadkar said Monday that it’s too late for the UK to tell the EU what it wants and any Brexit extension request would have to be with a purpose, although no one wants a rolling Brexit cliff edge.
Thus it’s simple decision time for the UK rather than engaging in the “games of chickens”. French European Affairs Minister Loiseau also said it’s time for Britain to make a decision about its exit and a delay would lead to uncertainty: “If there is nothing new, more time won’t add anything apart from more uncertainty, and uncertainty leads to anxiety. We don’t need time, we need a decision. Still, if Britain wants to renegotiate a deeper future relationship, for example in the single market, the EU would be stupid not to say yes”.
Almost all the other EU leaders/diplomats/officials are also of the same opinion, at least publicly and pressing for a long extension of 1-2 years rather than a short 3-6 months and that too with a specific acceptable purpose, not just to buy more time. The EU is pressing for either no-Brexit or a soft Brexit like the UK could stay in an EU customs union as an “independent country”, yet continue to enjoy almost all the trade benefits of an EU member state (free trading access in the Eurozone and vice-versa).
But such soft version of a Brexit will be regarded as a “Brexit in name only” and will be treated as a backdoor entry to the EU or as continue to “live in together” with the EU even after a “divorce”. Theresa May is against such soft version of Brexit and so most of the British lawmakers/public, who supported a clean Brexit. Theresa May thinks a no-deal (Brexit) is better than a bad deal. There is another issue of EU Parliament vote by May, and if the UK does not participate in it, then there will be a legal/technical question how a “non-member” state continues to stay in the EU with all the privileges.
On Friday, the EU Brexit chief negotiator Bernier made a proposal for the UK to have “unilateral exit” from the customs territory/union (CU), but the UK declined it as a “rejected old proposal”. Barnier told EU ambassadors, that the EU is willing to give Britain a unilateral exit from single customs territory/union (CU) while preserving other elements of the backstop. The EU will insist the UK will not be kept in CU against its will. This is exactly the big concession that Theresa May won in the withdrawal agreement.
Barnier's other solutions on the backstop include giving legal force to the Tusk and Juncker’s letter in a joint interpretive statement. EU side thinks this will bolster the "best endeavor/good faith" language on how the backstop arbitration panel works. But all there EU/Barnier offers on Brexit said to have been rejected by the UK already and is nothing new.
The DUP said: “Barnier’ offer shows no respect for the constitutional and economic integrity of the United Kingdom. It’s a non-starter. The EU must respect the constitutional and economic integrity of the UK. This proposal does not. It is no more acceptable to place a new border between Northern Ireland and Great Britain than it would be to put a new border between Northern Ireland and Rest of Ireland”.
On late Friday, Barnier said in a series of tweets: “I briefed EU27 Ambassadors and EP today on the ongoing talks with the UK. Following the EU-UK statement of 20 Feb, the EU has proposed to the UK a legally binding interpretation of the Brexit Withdrawal Agreement. Most importantly:
- “The arbitration panel can already, under Article 178 WA, give the UK the right to a proportionate suspension of its obligations under the backstop, as a last resort, if EU breaches its best endeavors/good faith obligations to negotiate alternative solutions”.
- ‘The EU is ready to give legal force to all commitments from January letter of Euro-President and Juncker through a joint interpretative statement. This will render the best endeavor/good faith obligations even more actionable by an arbitration panel”.
- “The EU commits to giving the UK the option to exit the Single Customs Territory unilaterally, while the other elements of the backstop must be maintained to avoid a hard border. The UK will not be forced into customs union against its will”.
- The EU will continue working intensively over the coming days to ensure that the UK leaves the EU with an agreement.
On Monday, the EU denied reports about punitive measures against the UK if they apply for an extension are “ridiculous”. The EU expects the UK to pay what it has signed up to, no more.
Apart from politics, on economics, BOE’s Haskel also tried to support the GBP through jawboning. He said: “The prospect of low business investment in the UK seems possible at least for the next few years and it is conceivable that the UK will require more time than the 21 months for Brexit transition. The investors also need to know the future trade relationship that we strike with the EU, which is far from certain. In the longer-term, the question is whether the investment will eventually bounce back after Brexit uncertainty is resolved”.
Overall, Theresa May has less than 24 hours to wrest concessions from the EU to save her Brexit deal, or else it could be a delayed Brexit or no-deal Brexit or no-Brexit at all. Although, it’s not looking good for Theresa May, and that means more political chaos, with May’s leadership speculation hovering once more.
But the chaos/uncertainty that would follow another defeat of her deal on Tuesday could throw up an option that the market would consider positive; i.e. delayed Brexit. The Cable bulls are already expecting Parliament to vote for a delay this week and would welcome some of the options that might emerge later, such as a softer Brexit with cross-party support, or a 2nd referendum. But some options may be also troublesome like– a leadership struggle, a general election, or maneuvers to push the country toward a no-deal Brexit later this year.
Talks were meant to continue over the weekend in Brussels, but no one senior was there and there wasn’t much sign of activity and negotiators on both sides are already indulging in blame-avoidance exercises. The Chief EU negotiator Barnier published some new-looking proposals on the Irish border on Friday, but it turned out the UK side had already rejected them days earlier.
On Friday, with discussions were increasingly acrimonious, the EU side sounded like they had given up as there are no further concessions possible after Barnier’s already rejected proposals. Since May gave Parliament the power to postpone exit day, the pressure to avoid a no-deal catastrophe has eased, and the 11th hour has slipped back a few months (3-6). But these few months extension of Brexit could be also for preparing a UK exit under WTO (hard Brexit) rather than under EU deal (smooth Brexit)
Another report suggests that Barnier has briefed EU27 ambassadors on Brexit "deadlock" late Monday and described increasingly "confrontational" mood with Britain. Barnier said any House of Commons vote was destined to fail and the European Commission ramping up its no deal planning and looking eyeing May 24 for the end of the extension. The EU has also offered Britain some additional guarantees to make legally binding the "best endeavors" language on the arbitration mechanism. All to be deposited at the UN in Geneva as the UK AG Cox wanted. But was rejected by the UK; hence "bleak" mood around Brussels right now.
As per reports, the EU commission has told EU 27 ambassadors: “The UK PM May told EU's Juncker on Sunday night her cabinet had rejected latest Brexit backstop proposals from EU. Thus EU27 leaders will discuss Brexit in Brussels on March 21, should not negotiate with May directly at the summit. The UK’s PM May, in Sunday call with Juncker, has not ruled out making another proposal on Brexit on Monday. The EU had offered Britain could unilaterally leave backstop, the deal seemed close on Saturday but the UK cabinet has rejected it”.
As per the latest report, the No 10 sources said deadlocked this morning & now the PM May heading to Strasbourg. Presumably, May is getting something to try to salvage the MP vote tomorrow. As a government figure pointed out, a defeat as big as last time could “be critical” for May, who is off for the Strasbourg on the hopes of a last-minute concession. The EU’s Juncker & Barnier is also traveling there on Monday night for a last-minute Brexit breakthrough.
For the EU, it will be easy to deal with Theresa May rather than divided British Parliament and thus it’s vital for the EU to ensure May could sell her Brexit plan with some last-minute concessions to the British Parliament. Although hard-Brexit would be also bad for the EU, the survival of Theresa May as British PM till at least Brexit day is also vital for them.
Technically, whatever may be the Brexit narrative, GBPUSD has to sustain over 1.31100 for a further rally to 1.31500*/1.31900-1.32200*/1.32800 and 1.33500*/1.34450-1.34900/1.35900 in the near term (under bullish case scenario).
On the flip side, sustaining below 1.31000, GBPUSD may fall to 1.30300*/1.29900-1.29600*/1.29300 and 1.28700/1.28100-1.27700/1.26600* in the near term (under bullish case scenario).
Pivot: 1.311 Support: 1.303 1.299 1.296 Resistance: 1.315 1.319 1.322 Scenario 1: Strong above 1.31100 and sustaining above 1.31500*/1.31900-1.32200*/1.32800, GBPUSD may further surge to 1.33500*/1.34450-1.34900/1.35900 in the near term Scenario 2: Weak below 1.31000 and sustaining below 1.30300*/1.29900-1.29600*/1.29300, GBPUSD may further plunge to 1.28700/1.28100-1.27700/1.26600* in the near term Comment: Short term range: 1.26/1.29500-1.33500/1.37