Analysts at Nordea Markets explain that last night, the EU and the UK reached a an agreement on a draft Brexit deal, but Theresa May still faces a tough challenge getting the deal through the UK parliament.
Key Quotes
“The UK and the EU have on “negotiator level” (i.e. between Michel Barnier and Olly Robbins) agreed on a Brexit deal draft. The deal contains a backstop solution for the Irish border, which keeps the entire UK in the Customs Union. However, recall that this only comes into effect in the case that the two sides cannot secure a soft border during the negotiations after 29 March regarding the future relationship.”
“Theresa May has called for an emergency meeting with her Cabinet today at 14.00 local time (CET 15.00) where they will digest the text, and May will ask for their support. Their backing is not at all given and it is likely that we will not see “white smoke” for days.”
“This is of course a very important step, but the real challenge still lies in the UK parliament, i.e. House of Commons. Thus, about 50 furious pro-Brexit Tory lawmakers will likely object, and Arlene Foster (leader of May’s coalition partner, DUP) has dismissed the earlier version a few days ago, and she was rather sceptical talking about the deal yesterday evening (without her knowing the details). Counting the number of MPs required to secure a deal, Theresa May needs support from several Labour rebels, which can prove difficult as Labour will not officially support the deal (they have six tests for accepting a deal, which is designed not to accept May’s deal).”
“If May gets an agreement, a special EU summit will be scheduled at the end of month where the EU Council Meeting will have to give their backing. According to rumours, this will be the 25 November.”
“So, the Brexit risk is far from over.”
“Medium-term the GBP is still cheap unless we end up in a cliff-edge no-deal scenario. In our fair-value framework, EUR/GBP should trade around 0.83-0.85 in case of a deal, while a no-deal cliff edge scenario should take EUR/GBP back above 0.90 in a very rapid move.”
Share
