UK Parliament Delays Vote on Proposed Brexit Deal
The UK parliament convened Saturday in an unprecedented manner, however, it did not vote on the deal recently approved by the EU.
Instead, parliament voted through an amendment that essentially delays voting on the new Brexit deal.
Parliament has to create a law that will facilitate an exit before implementing it. The fear was that if parliament passed the Brexit deal on Saturday, and then was unable to approve a withdrawal bill on time, it would be forced to leave without a deal when the clock expires on October 31.
The ‘Letwin amendment’ closed this loophole by stipulating that the withdrawal bill must first be passed.
However, by delaying the vote on the actual Brexit deal, the UK parliament did not reach the deadline set out in the Benn act.
The Benn act was also recently implemented and aims at preventing a no-deal Brexit as well. It states that an extension must be requested if a deal is not reached by the EU summit. For this reason, the UK embarrassingly had to request an extension before even getting a chance to vote on the new deal.
In short, the UK parliament is playing it safe. Although frustrating that there was yet another delay, a no-deal exit can be very damaging for the global economy. So perhaps this extra precaution was indeed warranted.
There was some drama surrounding the letter sent to the EU requesting an extension. However, the importance there is how the EU responds. They might grant an extension but insists that there won’t be any further negotiation. Alternatively, they may just sit tight to see how things progress this week.
The focus is now on the withdrawal bill being passed and then it will all come down to the vote on the actual deal. If parliament agrees to the new deal, there is still enough time for an orderly exit by October 31, although they have their work cut out for them.
The Letwin amendment has further reduced the odds of a no-deal Brexit which has underpinned the British pound. The pound to dollar exchange rate was last seen making an attempt at the psychological 1.30 level which reflects a nine-week high.
GBP/USD remains well bid considering the weekend events and we could see the pair extends gains from here.
The next major overhead resistance level that seems relevant falls at 1.3145. This level reflects resistance that held the pair lower in September on a weekly close basis. As well, the 200-week moving average has converged toward the level to create a bit of a confluence.
The 200-week moving average last came into play in 2018 and triggered a major reversal. The pair traded around 1.4300 at the time and declined to hit a bottom around the 1.2000 handle last month.
This article was originally posted on FX Empire
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