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Brexit Series: Review of ‘Roller Coaster’ Brexit week

It has been a ‘roller coaster’ week for UK politics, for Brexit negotiations, and for the British pound sterling.

  • It all begun on Tuesday when words came out that the UK Prime Minister Theresa May announced that she has reached an agreement with the European Union over the terms of future relations or a Brexit agreement, which is likely to have the support of all members of the EU. It was also reported that a cabinet meeting has been called on early Wednesday. As these reports hit the market, the pound sterling jumped sharply from 1.284 area against the USD to as high as 1.305 against the USD.
  • However, the market was somehow skeptical and there was still some selling pressure on the pound, which pushed the sterling to 1.297 area against the USD.
  • On Wednesday, the Prime Minister held a meeting with her cabinet ministers and after five hours it was announced that she has the backing of her cabinet ministers. The pound was showing extreme volatility on the day with a low around 1.288 area and high around 1.307 area. Pound closed positive on the day with close around 1.298 area.
  • The trouble began on Thursday when it became clear that Prime Minister didn’t have the backing of her entire cabinet. First of all, on Thursday morning, the European Council announced there will be a special Brexit summit on 25 November to officially sign off the deal. But then ministers started resigning. First, Shailesh Lakhman Vara, the minister of State at the North Ireland Office has submitted his resignation to Prime Minister Theresa May. Then, at 8:50 GMT, the big resignation came. Brexit Secretary Dominic Raab, the minister who was responsible for negotiating Brexit calling the agreement a threat to the integrity of the United Kingdom. The after almost an hour, Esther Mcvey, the work and pensions secretary submitted her resignation. Another junior minister resigned followed by two parliamentary private secretaries and two other aides.
  • As it became clear, that the deal is not likely to see a smooth passage through the parliament, the sterling tumbled sharply from 1.303 area to as low as 1.272 area against the USD.
  • Sterling was hit further after Raab’s resignation, leading Brexiteer Jacob Rees-Mogg held a press conference where he told journalists that he had called for a vote of no confidence in the prime minister. If enough support is garnered, Prime Minister May could face a real challenge to her position.
  • However, as Prime Minister Theresa May announced at 17:00 GMT press conference that she would continue to push for the agreement through the parliament, the pound recovered some ground and closed around 1.277 area.

 

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