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It’s Emergency Brexit Summit Day. No Surprises Are Anticipated…

By:
Bob Mason
Published: Apr 10, 2019, 06:52 UTC

Will EU member states support the 2nd extension or is the Pound in for one last Brexit shock?

Brexit shocker

The Latest

In the wake of some relatively unsupportive chatter from French President Macron, Theresa May traveled to Europe on Tuesday.

A last minute visit to Berlin and Paris came ahead of the EU Emergency Brexit Summit that kicks off later today.

The purpose of the meetings was for British Prime Minister Theresa May to persuade two of the more influential voices of Europe to support the extension request to 30th June.

While there should be no real reason for EU member states to decline the latest request, some EU leaders are of the view that an extension would unlikely change the deadlock in Parliament.

Theresa May and the EU saw the negotiated deal fail on 3 separate occasions in Parliament. How the British Prime Minister can garner the necessary support for a deal that has lacked Parliamentary support remains to be seen. Cross-party talks between the Conservatives and Labour have failed to deliver, for the very reason that an extension will likely just delay the inevitable.

The Day Ahead

The 10th April deadline is finally upon us. While the more optimistic will have hoped for Parliament to have found a compromise, it’s an extension that Theresa May will be in search of this evening.

An emergency Brexit summit starts at 1800 local time and the Pound, in particular, will be on tenterhooks throughout the day.

The Summit was scheduled following the EU’s imposed 10th April deadline for the British government to have a deal in place following the previous 2-week extension beyond 29th March.

EU member states will likely debate the merits of the extension. The debate will be on whether an extension to 30th June is considered adequate. Donald Tusk has called for EU leaders to offer a more flexible 1-year extension. Certain EU leaders, however, have some misgivings over Britain being involved in the EU Parliamentary elections next month. Britain is now considered a Eurosceptic and the last thing EU member states need is another Eurosceptic present in Brussels.

It’s certainly going to be interesting to see what member states decide. After more than 2-years of negotiations, the EU has shown little interest in returning to the negotiating table. Will the EU impose a condition to the extension that prevents further negotiations?

That would leave the British PM and Parliament with a simple choice. Leave without a deal or accept the existing deal. Such a prospect would raise the prospect of a second referendum that also found little Parliamentary support in recent weeks.

As for British Prime Minister Theresa May… An extension to 30th June would likely see her survive the early part of the summer. A 1-year extension and it may end up being curtains for Theresa May and quite possibly the Tory Party.

The Pound

At the time of writing, the Pound was up by 0.16% to $1.30693. The Pound has found support on hopes of the EU approving the latest extension request. The devil will be in the details, however. We can expect the Pound to be particularly sensitive to the outcome of today’s Summit.

What is the best possible outcome for the Pound? It will likely be a vote in favor of an extension to the end of June.

GBP/USD 10/04/19 Hourly Chart

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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