This week there have been numerous votes in Parliament but with just 14 days to go, the final form Brexit will take is still unknown. Despite changes being made to May's proposed deal with the European Union (EU), it failed to get approved and parliament voted not to leave without a deal. Parliament rejected a second referendum, suggesting a delayed Brexit a more desirable option. In summary, this week has revealed that MPs do not want the proposed Brexit deal, they do not want a referendum, they do not want to leave the EU without a deal and they do not want to leave the EU on the 29th of March. What they do want is yet to be determined. Despite Parliament's no deal vote, the UK must still leave the EU on the 29th of March, unless a delay is agreed. A delay would require all 27 EU member countries to agree or the withdrawal of Article 50. It would be reasonable for the EU to ask what the purpose of a delay would be. A second referendum or an election could be a justification but an extension in order to make amendments to the existing deal could result in a delay not being granted. Taking a new approach and potentially remaining in the single market, could see a delay approved. It is in no one's interest to have a no deal Brexit but without a clear alternative this is still a possibility.
What does next week have in store? At the end of the week, the EU member countries will gather at the European Summit where they could ratify the treaty and approve a short, or long, delay if circumstances are right. When the call for another referendum was rejected, it was because some MP's believed it was not the right time for one. It is likely the Brexit deal will be resubmitted to parliament next week. The Democratic Unionist Party (DUP) and European Research Group (ERG) may consider the possibility of losing out on a Brexit deal altogether if there is a delay. Their position has remained consistent that "no deal is better than a bad one" and "a bad deal is better than no Brexit". The outcome is still too hard to call and the outlook remains uncertain.
Brexit uncertainty has been felt the most in the currency market and the relative performance of stocks with international revenues relative to domestic. It remains probable that a deal or no Brexit will both be positive for the pound and a no deal Brexit result negative. The pound has risen 4% this year, reflecting the declining probability of a no deal Brexit. As we move closer to the Brexit conclusion, the swings in currency may get sharper. Fortunately for sterling investors, the MSCI World Equity Index is up nearly 12% in dollar terms this year, which means that even after the currency appreciation, it is still up 7.5% in sterling terms. For global investors, China's slowing growth, the consequent stimulus package which was announced last week and progress on trade talks are all more important than Brexit.
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