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Brexit chaos continues with the can kicked further down the road

The Brexit can has been kicked down the road for a couple of weeks at least, but we are not out of the woods yet. We look at the latest developments and the impact on markets. The increased market fear over an inverted US yield curve is impacting on the outlook for forex, equities and commodities.

A Brexit cliff edge has been averted, at least for now. The EU-27 granted an extension to Article 50 to kick the can down the road. With the EU returning the ball back into the UK’s court, with interest, Parliament has to now decide on the outcome. Firstly, it could accept Theresa May’s much maligned deal and exit the EU after a short technical extension to 22nd May. But if Mrs May’s deal fails in Parliament again then the legislative takes control of the process and has until 12th April to agree on an alternative deal prospect, which would require a much longer extension for negotiation (and/or second referendum, general election etc), leave with no deal, or revoke Article 50. Sterling has found support on the extension, but with all potential scenarios still on the table, upside has been limited. The problem is that Parliament has to now decide on what it does want, and not just what it does not. This process could move quickly this week as today the Parliament has the opportunity to take control through amendments to motions by laying out a series of indicative votes (reportedly seven options) on alternative proposals (such as an EEA style “Norway plus”, or customs union). Which indicative votes are chosen and their order could be crucial. In granting this extension, Mrs May’s deal also looks highly unlikely to pass if it were to be allowed a third “meaningful vote”. Whilst a no deal outcome is still possible, the likelihood is that Parliament will coalesce around some form of softer Brexit. With sterling above $1.3000 this is certainly what the market still thinks.

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At Hantec Markets Ltd we provide an execution only service. Any opinions expressed by analyst Richard Perry should not be construed as investment advice or an investment recommendation. This report does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. Forex and CFDs are leveraged products which can result in losses greater than your initial deposit. Therefore you should only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such transactions.