Theresa May is to meet with senior cabinet ministers at Downing Street today in a bid to secure approval for her revised draft Brexit agreement. If successful, it will then be passed to the EU for the scheduling of a November EU summit to ratify the agreement.
The Devil Is In The Details
The details of the deal are not fully known. However, following continued talks between the EU and the UK, the details have reportedly been agreed on at a “technical level” between the two sides and now need parliamentary approval.
However, many Brexiteer Tory MP’s are warning of a backlash against May if the deal leads to the UK remaining in the customs union, even if only on a temporary basis.
Furthermore, it is not clear yet how the issue of the Irish border will be dealt with. The issue of how to handle the passing of goods between mainland UK and Northern Ireland has been the most contentious in negotiations so far with both the UK and the EU adamantly refusing to compromise.
Indeed, May is under an enormous amount of domestic political pressure over the Irish border issue both from the DUP, with which May’s Conservative party shares power and also from a broader range of MP’s across the political spectrum who are concerned about the repercussions of establishing a hard border in the Irish sea.
DUP Remains Against Hard Border
Arlene Foster of the DUP told reporters:
“The prime minister is very clear about where we stand on all of this. As you know we’ve written to her, she’s very clear that we cannot be separated from the rest of the UK, either in terms of customs or indeed in terms of regulatory alignment either. Regulatory alignment would mean that we would diverge from the rest of the UK, we would stay in the single market, whereas the rest of the United Kingdom would not.
We would have a democratic deficit insofar as we would be taking rules from the European Union and would have no way in influencing those rules. It’s a question of whether we’re separating the union – whether we are dealing with the United Kingdom in a way that leaves us adrift in the future. As the leader of unionism in Northern Ireland, I’m not about to agree to that.”
Tory MP Warns of Leadership Contest
The pressure on Theresa May from within her own party is also surely taking a toll as Andrew Brigden, a prominent Brexiteer has highlighted the likelihood of a leadership contest if May presses ahead with a plan to stay in the customs union.
Brigden told reporters:
“Further details of this dodgy deal will come out later on. The cabinet are meeting at 2pm. Cabinet ministers with honor would resign over these proposals if they can’t persuade the prime minister to drop them. But there is not as much honor in politics as perhaps there should be. Failing that I think there will be the 48 letters in very imminently once the details of this proposal are out in the public domain. Under the rules of the 1922 committee, it would probably be Monday if the letters come at the end of this week.”
It seems that traders are preparing for the worst ahead of today’s 1400 GMT meeting with implied volatility in Sterling at its highest level since the 2017 general election.
Technical Perspective
GBP/USD continues to trade within the descending triangle pattern which has framed price action over the last few months. The 1.2690s level has underpinned the move for now though with price continuing to find resistance along the bearish trend line; we could see another test of the level shortly. Alternatively, if we see price break above the trend line, traders will be looking at a break of the 1.3299 level next to confirm a breakout.