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Exchange Rates 14.01.2019 analysis

On Tuesday, the British Parliament will have to reject or approve the proposed Brexit agreement with the EU, Theresa May. Any decision will be fateful because the future of Great Britain for years to come is at stake. It is worth noting that English politicians have repeatedly proved their unpredictability over the entire time of discussion of this issue, so you can wait for anything. Pound, of course, throwing provided.

The failure of the negotiations is likely to be the worst scenario for the country's economy. In this case, the dynamics of sterling will depend on monetary and fiscal policy. This is what experts write:

"If this happens, then the economic problems will be more important for the Bank of England than the inflation shock. Therefore, the regulator will lower the rates and possibly resume the asset purchase program. For British bonds, this will be a bullish factor."

Political events can cause the collapse of the pound paired with the dollar below $ 1.20, and this will be a good opportunity to buy it. The risk of withdrawing money from Britain as a result of Brexit is much lower than for any other state that decided to leave the European Union, strategists are sure.

Exchange Rates 14.01.2019 analysis

In case of failure of the vote, the British parliamentarians must provide a backup plan for the country's withdrawal from the EU within three days. Recall this initiative on Wednesday, January 9, was supported by 308 members of the House of Commons, 297 people were against it.

It is expected that the so-called "Plan B" will include three points.

Exit without a deal.

According to sources from the Times, at least two groups of parliamentarians promised to arrange a kind of "coup" if the Theresa May agreement is rejected. They plan to make changes to the rules of the House of Commons, to limit the powers of the government.

On the consequences of "hard" exit warned the head of the Bank of England, Mark Carney. Food prices in this development soar by 10%. Although the price increase, he said, will become a "one-time effect," consumers who start buying cheaper products will quickly feel it.

The seriousness of the possible consequences was described by the Minister of Health Matthew Hancock. The worst version of Brexit will result in at least an increase in funding for the NHS (national health service), whose budget depends on the pound rate. Part of the purchases falls on foreign goods and drugs, meanwhile, the sterling loses in value as the exit from the EU approaches.

In addition, the exit of Britain from the group without a deal threatens local residents with other major problems. First of all, they will have problems when traveling abroad. For example, to travel to the EU by car you will need to issue an international driver's license. The British will also have to pay for roaming when traveling to Europe. Potential problems include the risk of stopping flights between the UK and Europe.

General election.

The leader of the Labor Party, Jeremy Corbyn, recently called on the Prime Minister to announce general elections if parliament voted against the Brexit agreement. It is possible that such an idea has some support in parliament, but is not supported by the majority of Britons. A recent Sky Poll poll showed that 45% of residents are against the new general election, and 37% are for.

It is unlikely that something can be achieved with the help of new elections, "even greater chaos will begin," a parliamentary source told RIA Novosti.

New referendum.

This idea is supported by a rather serious group of parliamentarians, in its composition and conservative deputy Anna Sobri. Here is what she said about this:

"I do not know what will happen. I only know that many who voted for Brexit are now more and more worried. This is their future, the future of their children and grandchildren, and they have the right to speak now when they know more about what Brexit looks like. I think they are starting to see that the best deal is one that we already have with the EU. We need to give people the opportunity to revise the decision and change their opinion."

Preparation for a new referendum will take at least 22 weeks, calculated at University College London, University of London. The earliest time when it can take place in May.

Performed by A Zotova,
Analytical expert
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