UK: Brexit in focus - Rabobank

Analysts at Rabobank point out that in the UK, PM May will be putting her deal to Parliament and Parliament is either going to agree it, in which case much of the hard work of the first phase of Brexit is ‘done’, and GBP will soar; or it is going to crash and burn, plunging us into chaos, and GBP with it.

Key Quotes

“Let’s be clear, the deal is going to crash and burn. Even one of the government’s whips, those responsible for forcing MPs to back government legislation, resigned last night in protest. Hardly a good sign. Indeed, the media are speculating that PM May could suffer a crushing defeat of over 200 votes, which would be the largest humiliation any government has received from Parliament since 1924. Yet GBP is currently up, briefly testing over 1.29?”

“The scale of such a looming defeat may well be the end of PM May. Odds are then that Labour leader Corbyn will launch an immediate vote of no confidence in May – and the odds are that the rebel Tories will happily reunite to humiliate him on that. In other words, Parliament will say “We hate her, but we hate you just as much.” But they might then knife Theresa anyway from inside the party. And no election might force Corbyn to swing his demands behind a “People’s Vote” instead. As noted yesterday, the government--whoever is leading it--will then have to come back by Friday with a new idea – and we can expect parliament to throw anything and everything at the wall until something sticks. “Norway?” “Canada?” “Extend/cancel Article 50?” For markets, this implies chaos – but also a step towards a final resolution of Brexit. It is binary.”