Our President’s Comments

3/13/19

Internal Markets Commentary

Brexit

  • Another tumultuous day in the ongoing Brexit saga and as was expected as soon as the Attorney General offered his legal advice in the morning, Prime Minister May’s amended Withdrawal Agreement was defeated in parliament by a margin of 391-242. That was around a 40-swing improvement from the prior vote on her deal, but still a comprehensive defeat for May’s government. After the vote, Prime Minister May reiterated that she believes her deal is the best and only option that can be negotiated, as long as Parliament wants to deliver both 1) an exit from the EU per the referendum result, and 2) an exit that does not result in a no-deal, disorderly Brexit. To avoid the latter, May will, as promised, table a new motion today, which will ask Parliament to commit to eliminating the possibility of a no-deal outcome. It should pass, setting up a Thursday vote on an extension to Article 50.

3/12/19

Internal Markets Commentary

Brexit and the State of the Markets

  • By late last night, PM May and Sec. Juncker had finally agreed on a new deal, which includes three new documents intended to provide additional legal guarantees that the UK can’t be trapped indefinitely inside the backstop arrangement. The new deal doesn’t give power to the UK to unilaterally exit the Irish backstop arrangement nor does it place a time limit on it as many Brexiteers wanted. It does however include a unilateral declaration by the UK regarding the backstop which, which PM May suggests has the same legal power as the existing framework. The new addition will give the UK some authority to walk away if the EU doesn’t do enough to replace it with a full trade deal. It gives the independent arbitration panel (comprising senior judges) authority to rule that the EU is acting in such a way as to make the backstop last indefinitely and in the case of “persistent failure” to comply with a ruling “it may result in temporary remedies” for the UK. Pro-Brexit MP and deputy ERG leader Steve Baker  has criticized the deal overnight, saying it falls “far short” of what he was looking for. The key now will be the position of the DUP, with Deputy Leader Dodds saying last that “all of this will need to be taken together and analyzed very carefully.” So, we’ll have to see how the new deal is received by parliament, but the initial reception from the financial markets has been positive, with the pound trading +0.418% stronger overnight after its +1.04% rally during yesterday’s trading session.

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