- Markets to focus on EU’s reaction to the White Paper
- US data later this afternoon
By Zafer Deniz
It’s a big day for the Pound. At some point today, the UK government will release its White Paper outlining the new proposals. The key issue still, is will there be a vote of no confidence for Theresa May? This is a genuine risk for Sterling. The Brexiteers are going to read through the White Paper and conclude that the deal is a 'cop-out'. That, just as Boris Johnson said, it turns the UK into an EU colony. Boris Johnson will also be able to deliver his resignation speech next week and call on the people to unite and reject Theresa May’s 'third way' as a violation of the UK's Brexit referendum. There is an attempt at revolt coming and the question will be whether May can resist it. The other question is how will the EU respond to the White Paper.
Of course, markets will also be questioning how the EU will respond to the White paper. On Monday night, speaking in New York, the chief Brexit negotiator for the EU, Michel Barnier, expressed a positive stance. He changed tone and said that we had '80%' in agreement and we 'are not so far' from the final 20%. There were some warning shots however, but the key message was constructive.
If the EU reject the UK's compromised White Paper out of hand then that throws May to the dogs. She will be ousted and then Michel Barnier will be faced in dealing with the hard Brexiteers and perhaps a return to prominence of UK Independence Party (UKIP) and Nigel Farage. That is a different scenario and one that they clearly want to avoid.
So, the likely outcome today is that the EU remain constructive on the White Paper which will support the Pound in the near term. The story to then watch closely is how the Brexiteers are responding to the White paper and what kind of a storm is brewing with it.
We await minor UK data later this morning and US data but the focus will undoubtedly be on the reaction to the White paper.