As Theresa May’s Brexit negotiations continue to cause consternation in Warrington and beyond, the departure of Brexit minister Dominic Raab has added yet another reason for both businesses and local investors to wonder just how much more bad news might be in store over the coming months.
Raab was one of four cabinet ministers to tender his resignation following Theresa May’s latest draft agreement. He said the deal contained “fatal flaws” and that the UK should prepare for a no-deal exit from the European Union.
Pound slumps again
Raab’s departure, along with Esther McVey and two junior ministers has led some to suggest that the Prime Minister will face a vote of no confidence unless agreement can be reached in the coming weeks. This was enough to send the GBP/USD to 1.28 and EUR/GBP to 0.88.
While the terms of the Brexit deal will have a major impact on businesses and a potential knock on effect on consumer prices, fluctuations in the pound will directly impact the thousands of people who have Forex as a component of their investment portfolio.
Brexit’s effect on private investors
On the face of it, the equation looks like a simple one. So far, any significant step or media announcement on the topic of Brexit has caused the pound to drop like a stone against other major currencies. Does this mean that investors will be selling like crazy before the next announcement sends things even lower? Not necessarily.
Successful investment, whether in the form of Forex, stocks or bonds is all about buying cheap and selling expensive. Things are inevitably coming to a head with Brexit, but the direction this will take is far from clear.
Brexit will affect other economies, such as the US and major trading partners in Europe too, and a positive Brexit deal will almost certainly bolster the value of the pound. It is also important not to get too tunnel-visioned on Brexit. Other factors, such as the Italian budget and the ongoing trade disputes between the USA and China also feed into the equation. This is why successful investors and traders carefully study a whole host of trading signals to try to see how a currency pair like GBP/USD or EUR/GBP is going to behave.
Will Theresa May see it through?
Everyone has their own opinion about the Prime Minister, but both supporters and detractors cannot help but agree that Theresa May is in an unenviable position. Right now, the role is something of a poisoned chalice, and if a formal challenge emerges, there are likely to be fewer contenders for her seat than is usually the case.
Nevertheless, there is growing talk of a potential no-confidence vote, and some party members have submitted formal letters in this connection. So far, 22 ministers are known to have submitted letters, while others might have done so in secret. Ministerial rules state that 48 letters are needed to trigger a formal leadership challenge.
May remained defiant in a news conference outside 10, Downing Street at the end of last week. When asked whether she would defend a potential challenge, her reply was unequivocal: “Am I going to see this through? Yes.”
The day draws closer
From the perspective of Warrington’s residents and businesses, ministerial in-fighting and points-scoring is an unnecessary distraction from the matter at hand. While the Prime Minister is battling to defend her own political career, it only makes the task of reaching a successful agreement with the European Union more difficult. One thing is certain – unless a Brexit Agreement is formally agreed over the next couple of months, a no-deal Brexit will be almost certain.
