The pound fell today (14 November) as Brexit negotiations moved into a make-or-break phase.
Sterling was down 1% against the dollar (GBPUSD=X) by lunchtime on Wednesday and down 0.8% against the euro (GBPEUR=X). Market commentators said the slump was due to fears that UK politicians will reject the draft Brexit agreement reached last night.
“Now this easy part is out of the way along comes the hard part of selling it to a divided Parliament full of vested interests and factions,” Deutsche Bank’s strategist Jim Reid said in a note to clients on Wednesday.
UK prime minister Theresa May has called a meeting of her cabinet at 2pm local time on Wednesday to agree the terms of the deal. However, the draft agreement is already being attacked from both the left and the right.
Former Foreign Secretary Boris Johnson, who resigned over the government’s handling of Brexit, said the deal would reduce the UK to a “vassal state” and called for ministers to resign in protest. Labour’s shadow Brexit secretary Kier Starmer has also threatened to vote down the bill unless the government can provide a detailed view on the future relationship.
Neil Wilson, the chief market analyst for Markets.com, said: “The cabinet will likely pass it but with assault from all sides of the house and Brexit divide, it seems impossible parliament will vote it through. Both sides see this as capitulation. In trying to please everyone, Mrs May satisfies no one.”
Paul Donovan, UBS’s chief economist, said: “We should not get caught up in the heady excitement of the moment — there are lots of hurdles to clear.”
As a result of the still uncertain picture, markets “were in a bad mood as Wednesday got underway,” according to Connor Campbell, a financial analyst at SpreadEx.
The pound was down 0.9% against the dollar to $1.29 at 11.30am and down 0.7% against the euro to €1.14. After falling nearly 1% at the open, the FTSE 100 (^FTSE) was up 0.06% by midday. Campbell said while the early weakness was partly due to poor performing commodity stocks and oil price fears, “the index does perhaps also have a case of the Brexit jitters.”