Update on Brexit from ANZ’s Brian Martin: FXWW

From the FXWW Chatroom – There is a sombre mood ahead of this Tuesday’s vote in parliament on the EU withdrawal agreement. Despite some speculation, the Brexit minister has confirmed that the vote will go ahead as planned. It is widely expected that the vote will fail as the opposition Labour Party desperately seeks to force a general election and the Lib Dems, SNP and DUP say they won’t support it along with rebel Conservative MP.
PM May continues to argue that if the deal does not go ahead there is a very real probability Brexit will not happen.
So if the vote fails, what are the options? The government must get back to the commons in 21 days with its alternative proposal and then MPs have a week to debate it. The proposals can be amended.

* Preparations for a no deal Brexit will intensify. The BOE will ensure orderly markets through enhanced liquidity provision if needed.
* There are calls for PM May to step aside if the agreement fails. That would seem quite probable if the government is heavily defeated by 70plus votes.
* Interestingly, prominent hard Brexiteer Boris Johnson said PM May could continue on in order to renegotiate and dismissed speculation he is mounting a leadership challenge.
* The Conservative rebels do not seem to have united behind a single candidate to oppose the PM and Johnson would be a divisive leader.

* Hard core Brexiteers continue to offer no credible alternative to the Withdrawal agreement except a hard no deal exit. There is cross Party support in parliament to prevent that.
* The government is unlikely to be defeated in a motion of no confidence. The DUP have said they will support the Conservatives, so a general election is not a central case outcome.
* The March 29 deadline is extended to allow for further negotiation.
* Norway+. The UK joins EFTA but has a ‘plus’ deal because it remains part of the customs union to avoid a hard border for Northern Ireland.
* PM May calls for a people’s vote on her deal or remaining in the EU.
* There is a second referendum
* if the Withdrawal deal is only narrowly defeated it could go back to parliament

The list of possibilities is large and cabinet ministers are saying anything could happen.
For the economy, the associated uncertainty is negative and should continue to weigh on activity with firms accelerating contingency plans to avoid a hard no deal. GBP will remain under pressure.

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