I hate to bring up the “B” word again, since it feels like it’s all we’ve heard about over the last twelve months, but Theresa May’s Brexit campaign is now at a critical juncture.
On Tuesday, the embattled UK PM will present an amended Brexit plan to parliament. May will submit her altered version alongside all suggested amendments having had just over a week and a half since the historic government defeat in the commons.
The speaker of the House will then decide which amendments can be voted on. The two receiving the most attention so far are the “Cooper amendment,” and the amendment proposed by the top of the 1922 Committee, the sub-sect of the conservative party responsible for tabling a vote of no confidence against May before Christmas.
What is the Cooper amendment?
This amendment proposes a vote on whether or not article 50 can be extended by up to nine months, unless May has secured a deal by February 26th. Given the amount of opposition from Labour and pro-EU conservatives, it is likely this amendment will be voted in. The market would likely take this as a positive as it would raise the chances of Brexit being pushed back, and lower the chances of a “no deal” Brexit.
What is the 1922 committee amendment?
This amendment proposes the Irish backstop be replaced with “alternative arrangements.” While the amendment could also be voted in, this might not be taken as such a positive by the market as the EU has consistently reiterated that the backstop is non-negotiable.
Plus, the Irish Republic has itself declared its unwillingness to alter the framework of the backstop. Ultimately, this amendment might actually increase the chances of a “no deal” Brexit, weighing on GBP.
As the reality of the Brexit deadline grows larger in the minds of MP’s, May is hoping that many will come to their senses and abandon the political posturing which has plagued the negotiations thus far, giving her the support she needs to secure a deal rather than risk leaving the EU without one.
Indeed, there has been a subtle shift recently. The DUP, which has ferociously protested against the backstop since day one, has moderated its tone somewhat recently, declaring that it could be open to accepting “alternative arrangements” as proposed by the 1922 Committee amendment. Pressure on the party is growing given the rising risk of an independence referendum in Northern Ireland if the UK leaves the EU without a deal.
The European Research Group, led by Brexiteer Jacob Rees-Mogg and consisting of around 70 conservative MP’s, has also started to sound more concerned about the prospect of the UK leaving without a deal.
However, May is still a long way from securing a deal given the jaw-dropping 230 vote margin her plan failed by last time around and it will surely take a miracle for her plan to pass through easily on this next attempt.
The breakout in GBPUSD has stalled just shy of the 1.3304 Q3 2018 top. A break of this level will be needed to confirm a proper bullish shift. While below here, a rotation back down to retest the 1.2990 structural support, and the broken falling wedge pattern, looks likely. If these levels can hold, bulls will then be looking for a further push higher to test the 1.3304 level.