Bercow's Brexit ruling - Why the tail may wag the dog
Common's Speaker John Bercow increases pressure on May
For some time I have been advocating selling GBP/USD rallies at technical points.. However, the latest developments are having me pause for thought and it is as I have been thinking about the decision made by House of Commons Speaker, John Bercow.
There is a sense of irony here that a speaker in the House of Parliament may be responsible for altering the path of Brexit more than the actual voting members. If you missed the significance of the so called 'Grieve amendment' decision you can read up on it here. The big picture is that this amendment was designed to stop Theresa May pushing Parliament to the no-deal Brexit wire (29 March 2019) so they would face a highly pressured situation where the choice was her deal or a no-deal. This was good for May, but bad for those who don't want May's Brexit deal with the potentially permanent N/Irish border problem. So, Bercow has turned the tables.
The implication of the Grieve amendment, ruled on by John Bercow is that now Theresa May will only have 3 days to come back with a plan B to Parliament. This is instead of the original 21 days. According to Mark Darcy from the BBC this will mean:
that in the event the PM loses next week, the Commons will then have a chance to vote on alternative policies - everything from a "managed no-deal" to a further referendum, via a "Norway option" or a reheated version of the current deal, could be on the table.
If a majority could be found for anything, it would not have the force of law - but it would at least indicate a policy which had the support of MPs.
So, I could envisage a scenario where May loses next week (she is expected to). There is then 3 days of bedlum where MP's vote on alternative policies from the Norway style deal, a second referendum, a no-deal, set up a colony on the moon etc etc. It will achieved nothing in itself, but it will be deeply de-stabilising. In fact so de-stabilising that I could see Jeremy Corbyn triggering a vote of no confidence in the Gov;t and going for a General election. Now, this is where it gets interesting...
Jeremy Corbyn is a deeply principled man. Some of his principles are seen as odd and impractical in our world, but nevertheless he tries to stick to them an admirable quality, even if you disagree with him. The thing is, I could see the British Public saying, "May hasn't been able to get a Brexit deal' so "Let's see what Corbyn can do'. Most people in the UK are sick of Brexit. They know it's important and that it matters, but they haven't got a clue about it. I was speaking to my Optician in December about Brexit as I mentioned that I needed some new glasses to go to Dubai with so I needed them in a hurry. (I was taking a intensive trading course for a Broker in the Palm Jumeirah). This is all just by way of justification that I don't go around talking about Brexit to all and sundry :-). She said to me 'Oh I don't understand Brexit' (and I have tried to) . I said, 'Don't worry'. It is basically just a political rubiks cube that may be unsolvable, no-one understands it.
All that is to say this - I see a potential for upside to the GBP from here. Look at the options -
- May loses the vote - Potentially opens the door for Corbyn and second referendum - GBP appreciates.
- May wins the vote - GBP appreciates
- May postpones the vote by extending Article 50 - GBP appreciates.
So, I have stopped my GBPUSD short bias for now. I see upside for the GBP from here, but the caveat is the timing of this acknowledging significant headline risk. Caution is advised from here as volatility may well be ahead.