Connect with us


Post the Rejection of Theresa May’s Withdrawal Agreement, Pound Surges



The Pound

Following the defeat of Prime Minister Theresa May’s Brexit withdrawal agreement, the pound witnessed a surge on Tuesday.

May’s Brexit deal was rejected by 230 votes – one of the largest defeats for a sitting government in the history, with MPs voting 432 votes to 202 to reject the deal.

Opposition Labour leader Jeremy Corbyn has called in a vote of no confidence in the government that could result in a general election. The vote is to be held at 7pm Wednesday.

MPs are expected to debate the no confidence motion called in by the opposition, for around six hours after May’s questions at noon. Corbyn said it would allow the House of Commons to “give its verdict on the sheer incompetence of this government”.

The pound raised more than a cent to stand above $1.28 after the vote on the withdrawal agreement. It was last trading at $1.2871, up 0.06 percent on the day.

The pound rallied up 0.5 percent against the euro at 88.7 pence.

The rejection came as a huge blow to the Prime Minister, who had spent more than two years negotiating a deal with the European Union. The defeat was much more than what was anticipated in the market. The pound surge is based on the market expectations that the vote defeat will now push lawmakers to look for alternate options.

Amidst the growing uncertainty in the financial market, investors have been urged by UBS Global Wealth Management to limit their exposure to UK assets as the market is still vulnerable to political volatility.

‘I think the market’s take on (this defeat) is that it ups the probability of a soft Brexit ultimately evolving after a no-confidence vote,’ said Alan Ruskin, global head of currency strategy at Deutsche Bank in New York.

Following the vote, UK economist Dean Turner said, Market volatility will not subside until a concrete conclusion to the process emerges.


Britain’s Road to Brexit Jeopardizes Pound Sterling Value




As Britain treads on the path towards no-deal Brexit after the indications from Boris Johnson’s government, the Pound Sterling has reached an all time low of two years.

The Pound Sterling has reached a 28 months’ low and experienced a drop of more than 1 percent, reaching to the current value of $1.2230, the lowest ever since mid-March 2017. It also experienced a drop against the euro, reaching a value of €1.1004. As per analysts, the currency could further experience a downfall.

As only three months are left for the impending deadline of Brexit, pressure for delivering it seems to be mounting up on Boris Johnson’s cabinet. Earlier, Michael Gove the Chancellor of the Duchy of Lancaster and no-deal Brexit planning, said that the government “must operate on the assumption” that no-deal is a possibility. However, the Prime Minister seemed to separate himself from such comments.

As the currency reached an all-time low of two years, Boris Johnson pressed upon the claims that there are still chances, the EU might agree for a new withdrawal deal.

As the Pound Sterling experienced a drop, the analysts at ING Group began to express their stance and make speculations on future turn of events. Petr Krpata, a currency strategist of the organisation said that the Pound experienced a downfall when “the events over the weekend, where the current stance of the new government became clear.”

He said, “The market [is] awaking to the reality of a new UK government, its rather combative stance on the current EU-UK Brexit deal, and its open remarks on the rising probability of a no-deal Brexit.”

According to the Chairperson of Hedge Fund Currency Sale at Mizuho Bank, the market has also experienced a shift in the price as the chances for a no-deal Brexit happening has increased to 50 percent as compared to the previous 20 percent chances.

It is not for the first time, the Pound has seen a drop in the Premiership of Boris Johnson. The Pound has experienced a downfall of 1.8 percent from the time Boris Johnson unveiled his cabinet comprising of hard Brexiteers and claiming that Brexit will happen by October 31, with “no ifs or buts”.

Continue Reading


Uncertainty Over Brexit hits UK with Investment and Hiring Prospects



Uncertainty Over Brexit hits UK with Investment and Hiring Prospects

The financial uncertainties around Brexit are subject to deal or no deal of the agreement. Ever since the referendum in 2016, the UK firms have seen multiple falls. Therefore, as per the latest plan, they have planned to reduce investment and hiring, a survey of chief financial officers showed, Monday.

The survey conducted by Deloitte, a financial advisory firm, stated that as many as 83% of the CFOs believed that parting ways with the EU would hurt Britain’s going concern. Besides, only 4% believed that such a move was good, and taking risk could actually yield them rewards.

Britain’s economy opened on a high this year when companies were preparing to leave for the original deadline in March. However, the economy slumped after the deadline was delayed until October 31.

As per the surveys published last week, the British economy followed a downward trajectory in the second quarter. Further, England Governor Mark Carney also warned of the increasing risks from a no-deal Brexit and from the growing trade rifts worldwide.

As per the records, two thirds of the of the CFOs surveyed by Deloitte are likely to cut hiring in the next three years; as a result of Brexit, while some 47% firms are expected to reduce the capital spending.

Impact of Brexit on UK firms was also visible all throughout 2018, when House of Commons failed to register any progress on the deal. In fact, when British Prime Minister Theresa May suffered her greatest defeat in Commons, the investor’s confidence became really wobbly.

“Brexit uncertainty is crippling business investment. “We’re at risk of falling further behind our G7 competitors,” Rain Newton-Smith, the CBI’s chief economist, said.

Financial fallout looks on cards for Britain. While, May’s vow to deliver Brexit ended in disarray, not agreeing with her terms might now lead to an even worse situation. As it stands, Britain will soon know who their new leader will be, but what UK firms really need to know is, if Britain is falling out, or leaving the European Union with a deal at hand.

The survey conducted by Deloitte was formed on responses from 79 CFOs, including 489 from FTSE 3350 companies. It was conducted between June 12 to 28.

Continue Reading


Foreign Markets Experience Rise as Bank of England Holds off Interest Rate



Bank of England

On Thursday, the Bank of England (BoE) cautioned and alerted on the economic stance and growth for the UK. The officials said that while the economic stance is negating continuously, the financial advancement might reduce to zero in the second quarter of this year.

These speculations come amidst the ever-increasing risks to the economy of the country as it nears the fate of a no-deal Brexit and global trade tensions. The nine-member committee of BoE decided to confine the interest rates at 0.75 percent. They also voted unanimously to retain the stock of the UK government bond purchases at £435 billion.

Following such an announcement from the Central Bank, European Banks witnessed a rise as investors reacted to the decision of curbing interest rates by the Bank of England and the Federal Reserve.

The bank continued to press hard on the fact that if in case, Britain is able to evade a damaging no-deal Brexit, then the interests rates will increase “at a gradual pace and to a limited extent”. The central bank also brought attention towards the discontent felt inside the organisation on the fact that Britain would have a “smooth” Brexit with minimum disarray.

As per the BoE, Britain’s economy will experience no growth in the second quarter, even though they predicted that the economy would see a growth of 0.2 percent every quarter as foretold last month.

The Monetary Policy Committee of the Bank of England has regularly said that the growth or depreciation in the interest rates depends upon the no-deal Brexit, and the movement relies on the demand, supply and exchange rate.

Earlier, it came into notice that the British currency saw a depreciation of three percent in May and the delay on Brexit was considered to be the prime factor for this fall in the value.

In its policy statement, the Central Bank said, “Globally, trade tensions have intensified. Domestically, the perceived likelihood of a no-deal Brexit has risen. Trade concerns have contributed to volatility in global equity prices and corporate bond spreads, as well as falls in industrial metals prices.”

Many economists also commented on the stance of the Bank of England and the all-day development in the stock market.

ING economist James Smith said, “All things considered, it’s slightly more dovish than one might have expected. The fact they are saying the perceived risk of a no-deal Brexit is rising suggests that they ultimately might take a more cautious approach than the rhetoric implied.”

Similarly, the Capital Economics economist Thomas Pugh stated, “If there is a no deal then the MPC will probably quickly change its tune and support the economy by cutting interest rates.”

Whilst the MPC committee looks forward to a steady growth of two percent if there is a “smooth Brexit”, the future stance and policies of the Bank of England, in wake of increasing global tensions, might soon witness a change.

Continue Reading


Ford’s Bridgend Closure to affect employment rate in the UK




On Thursday, the American multinational automaker Ford announced to close its Bridgend plant in South Wales in 2020, due to the lowering demands for some of its automobile’s engines. The step taken by the company is a big challenge for its workers, as they risk losing their jobs with the closure.

Ford’s Bridgend engine plant, which is a manufacturing facility of Ford in Europe -selling automobiles and commercial vehicles, once provided innumerable jobs to the workers in the country. It also built around 2.7 million automotive engines in 2018. However, analysts have anticipated that its closing would make about 1,700 people jobless.  

As a turnaround of its European operations, Ford would promote closure of many other plants along with the discontinuation of loss-making vehicle lines. In the same context, due to lowering demands, Ford has decided to end its production of 1.5-litre petrol engine by February 2020.

The expected pre-tax amount to cover the closing of Bridgend plant is approximately 650 million US dollars. The move has attracted criticism from trade union that has largely rejected the idea of the closure. The members have blamed the company for involving such extreme measures that could adversely affect the lives of the workers. They united in an effort to stop the closure, whilst taking the matter to the Welsh Assembly.

In the past two years, there has been a continuous decline in the sales of Ford cars, which has further affected its output and investment throughout the Europe.

Observing the future disadvantages of Bridgend plant, considering the current situations, Ford’s Europe President Stuart Rowley said, “Changing customer demand and cost disadvantages, plus an absence of additional engine models for Bridgend going forward make the plant economically unsustainable in the years ahead.”

As a result, Ford is in process of making some profits in other countries to reverse the losses in deteriorating European markets.

People who have been working hard to produce hybrid technology and electric vehicle components alongside manufacturing of third party vehicles to identify new opportunities have not been successful.

Due to the declining demands, the Closure of Bridgend plant also brings in more confusion for other automobile companies. Jaguar Land Rover and Honda have claimed that approximately 9,000 jobs would be lost if they close their British Plant in 2021, depreciating car sales and employment rate in the country.

Closing of the Bridgend’s Ford plant is expected to bring further downfall to the sales of cars in the country. Amid the Brexit crisis, the automobile companies have feared that a no-deal Brexit would definitely bring tariffs and customs checks to the vehicles, engines, and components, which would further raise costs and investments amid the decreasing demands.

Continue Reading


Are Continuous Brexit Delays Behind Weakened Pound Sterling?



Pound Sterling

Continuous Brexit delays have severely affected the pound sterling. Furthermore, the European Parliamentary elections in the country and the rising threats of a no-deal Brexit have raised concerns among few British officials.

A no-deal Brexit followed by the fall in the value of the pound would only add to the woes of the country. In addition, the battle to succeed Prime Minister May has made the existing situation even more complex as the economists believe that May’s resignation from her post on June 7 would rather ruin the British economy.

As per recent records, the British currency lost about three percent of its existing value earlier this month. The economists are of the opinion that the Prime Minister’s inability to find a proper solution over the Brexit deal with the opposition party is one of the main reasons behind the current downfall.

Pound slipped 0.13 percent to $1.2657, becoming as low as $1.2605 last week. In comparison to the US dollar and the euro, the British currency has fallen for three consecutive weeks.  

As a result, the prime-ministerial candidates have been under immense pressure to provide a more resolute solution for the Brexit deal. Though Foreign Secretary Jeremy Hunt has signalled that a no-deal Brexit would lead to worst consequences, many contenders have fully prepared themselves for the situations of no-negotiations that could occur over the withdrawal agreement.

In the recent European elections, Nigel Farage’s newly formed Brexit Party performed its best by winning around 31 percent of the votes and 29 UK seats in the Parliament. The overwhelming results in the elections indicated that the new Brexit Party was ready for all sorts of conflicts arising amid the no-deal risk.

The strategists in the country believe that the probability of a no-deal Brexit remains around 15 to 20 percent and the then-prime minister of the country would have to face a no-confidence vote for choosing that path. Since the UK is scheduled to leave the EU on October 31, the real deal is yet to start.

The ongoing political uncertainty in the country has disadvantaged the trading of pound, limiting the currency’s exchange rate and making it a much weaker currency in the present time. It appears that the rise in the British pound might highly be influenced by the next Prime Minister’s rule.  

Continue Reading