Under the uncertainty of Brexit, the pound will fluctuate.


      On the evening of the 15th local time in the UK, the British Parliament rejected the over-the-counter agreement between British Prime Minister Teresa May and the European Union with an overwhelming advantage of 432 votes against 202 support tickets. This is one of the biggest failures the Prime Minister has encountered in the House of Commons in modern British history. However, as a result, the pound against the US dollar unexpectedly rose by 0.05% to 1.287 US dollars. Earlier, the pound fell more than 1% against the US dollar, as shown below.

In 2018, the pound plunged 7% due to uncertainties in the unresolved terms of the Brexit.


      Richard Falkenhall, SEB analyst at Nordic Sian Bank, said: "Since the UK and the EU reached an agreement in November 2018 and caused several members of the government to resign, the market generally expects the government led by Mei Lan will be defeated."


      “Political turmoil, companies have experienced two-and-a-half-degree roller coaster days, and such days seem to have no signs of stopping. Business frustration, impatience and growing anger have accumulated to the point where words cannot be described, and companies are losing Patience,” said Adam Marshall, Director General of the British Chambers of Commerce.


      Previously, Adam Marshall, as well as business groups such as the Federation of Small Businesses, the Institute of Directors and the Confederation of British Industry, have called for a consensus in the British Parliament.


       Reason for the pound's rise

       In fact, the market has already prepared for the failure of Mei Lan to vote, but the scale of her failure is surprising. But what is even more surprising is that as the first financial street to be affected by political events, the pound has appreciated after the vote results. Many people have predicted that a devastating defeat will devalue the pound.


       What is going on here?

       Some investors believe that as the British parliament exerts greater power in the process of leaving the EU, the possibility of Britain’s “no agreement” to leave the EU is getting smaller and smaller, and it is postponed to leave the EU, hold a second referendum, or even leave the country. The possibilities are increasing. “Although the British Prime Minister has suffered the worst parliamentary vote in a century, this has prompted the pound to rise,” said Jeremy Stretch of investment bank CIBC Capital Markets. Earlier, Crispin Odey, the main donor and hedge fund manager of the Brexit, said he was preparing for the pound.


       Another new argument is that Mei Lan’s exit agreement has suffered a fiasco, making the market think that the possibility of the UK not leaving the European Union on March 29 is growing.


      But others worry that as other options become less and less, Mei Lan’s plan will be vetoed and the possibility of Brexit will increase.


      Helen Dickinson, CEO of the British Retail Consortium, said: “The UK’s “no agreement” to leave the EU means that the public will face higher prices and fewer product choices. British companies urgently need to determine the future of the UK and the EU. Trade relations, if they can't reach an agreement, they will be at a serious disadvantage."


      Despite speculation, the UK must now suspend Brexit because the most complete plan has been revoked, but companies can't just count on such speculation. Stephen Jones, CEO of UK Finance: “Financial industry companies have developed contingency plans to minimize the potential disruption of the UK’s 'no agreement' to the customer, but even the risks remain, especially when it comes to personal data transfers and The operation of cross-border contracts."


       Omar Ali, head of UK financial services at EY, a UK accounting firm, added: “Companies have no choice but to fully prepare for the UK’s “no agreement” to leave the EU.”


       But how things will develop in the end will also depend on how Mei Lan responded.


2019年01月18日

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