The sterling declined sharply in overnight trading after Theresa May admitted that her proposal would not pass through the house of commons. In a statement to parliament, she admitted that the deal she negotiated was not adequate for the parliamentarians. She said that in the negotiations, she had to balance on the important needs for the country with that of the European Union. She then postponed the vote until further notice. The House of Commons will go to recess on December 20 and will reopen in January 7. The country will also leave the European Union, with or without a deal on March 20th.
Theresa May faces a number of challenges. First, in her own party, there are those who want a soft Brexit. These are people who want to continue having a close relationship with the European Union. To them, they would want to have a Brexit that leaves everything unchanged. Then, there are those members who favor a hard Brexit where the country separates itself completely from the European Union. This option would likely create chaos at Dover, as customs checks begin. This would prolong the period it takes a truck to move from one region to another to days. Today, it takes less than 15 minutes to cross.
Then, in the opposition, she faces members who will likely never support any of her proposals. Finally, she also faces a challenge with the European Union which wants an easy deal with the UK. They want to export goods in a frictionless manner. They also want to import goods from the UK that don’t undercut their own producers. Therefore, in all this, it will be a tough balancing act for the premier.
As all this is going on, the country’s currency is being hammered. This year, the sterling has declined against the dollar by more than 6%. This is because of the uncertainty surrounding Brexit.
Other than these, today traders will receive the employment numbers from the UK. These numbers are expected to show that wages plus bonuses remained unchanged at 3% while the claimant count declined to 13.3K. The unemployment rate is expected to remain at 4.1%. This data will come after the disappointing GDP numbers released yesterday. The numbers showed that in the third quarter, the economy expanded by 1.5%, which was a point lower than the consensus estimates. The industrial production, manufacturing production, and trade balance numbers too disappointed. Therefore, amidst all these, there is a likelihood that the sterling will continue being under pressure.