As we hinted both last week and earlier today, the Parliamentary vote on Theresa May’s Brexit plan has been on its last legs for a while now. In a speech at the House of Commons, the Prime Minister delivered the coup de grâce this afternoon, cancelling tomorrow’s vote and vowing to return to Brussels to renegotiate the controversial Irish border backstop.
May did not set a date for renegotiations to be complete, but with Parliament going on holiday recess on December 20th, the prospects of an agreement before 2019 are looking increasingly slim. In all likelihood, a meaningful vote won’t come until late January at the earliest, further compressing an already-tight timeline before the current March 29 deadline for Article 50.
Perhaps more to the point, European officials have been vehement that they’re not willing to renegotiate the agreement on any timeline, though May continues to express optimism that they’ll come back to the table. In the words of the PM herself, “For as long as we fail to agree a deal, the risk of an accidental ‘no deal’ increases.”
GBP traders have opted to “sell first and ask questions later” on the news. In particular, EUR/GBP has exploded back through the 0.9000 handle and is within striking distance of its 15-month high near 0.9100. A break of that level could open the door for a continuation toward 0.9200 or 0.9300 in the coming days.