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Analysts at Deutsche Bank point out that today and  tomorrow  we have the important parliamentary Brexit votes in the House of Commons, which will be a key event for today’s session.

Key Quotes

“There are three important amendments to look out for. The first, amendment 4, requires the UK government to keep the UK in a customs union with the EU. The government could lose this vote, but as it is quite vaguely drafted, it’s not widely expected that this would prove fatal to May’s Brexit strategy. The second, amendment 7, requires the UK to remain in the EEA. A defeat here would be significant, but the government is less likely to lose as it’s not official Labour Party policy. The third, amendment 49, is probably the most important. This amendment gives more powers to Parliament over the final Brexit outcome.”

“Most importantly, if Parliament rejects the government’s final deal (which it has to put before the Commons by  30th November), Parliament can effectively take over the Brexit negotiations. In these circumstances, the baseline is likely to be that the UK goes straight to a very soft Brexit due to the make-up of MPs being very pro remain. From a market perspective, a government defeat on amendment 49 could therefore either be very bullish or very messy.”

“On the former, if the government loses the amendment and May continues, the tail risk of a hard Brexit would be substantially removed (if Parliament didn’t like the deal, it could instruct the government to go straight to EEA membership). On the latter, by losing the vote, hard Brexit MPs could trigger a vote of no confidence in May. If this was the case, the question is how much of the support of the Conservative Party May would lose. If only 30-odd MPs voted against her, she is likely to survive and be in a stronger position. If it was more like 80, May could resign and things could get very messy.”

“The bottom line is that amendment 49 is the one to look out for. Baseline would be that government offers more concessions today and wins the vote. But if the outcome was more uncertain, the crucial vote is likely to occur on either  Tuesday  evening or  Wednesday  morning/lunchtime, based on the parliamentary schedule as it stands. Thanks again to Oli for guidance on the above.”