Beijing News: Britains process of decoupling from Europe has changed again. The domestic parliamentary vote scheduled for December 11 was suddenly postponed the day before. At present, the British Prime Minister did not specify a new voting date, and said that he would strengthen preparations for the possibility of a non-agreement exit from Europe, which once again triggered concerns about the non-agreement exit from Europe. Influenced by the news, the UK financial market shook, with the pound falling 1.6% and the stock market falling 0.8%.
The parliamentary vote was abruptly cancelled. The new voting date is unknown.
The British Parliament was scheduled to vote Tuesday (Dec. 11) on the agreement, but the vote was abruptly postponed. According to the Financial Times, British Prime Minister Theresa May issued a statement to the House of Commons at the last minute on the afternoon of the 10th local time confirming the postponement of the vote on Britains EU-leaving agreement.
Mei admitted that she was facing a significant gap in the vote scheduled for yesterday, but she could not tell lawmakers how she would improve the agreement or whether she would put it to a vote before Christmas.
May traveled to European capitals on November 11 in the hope of negotiating a more favourable EU-leaving agreement for Britain. Mei said the bill would be submitted to Parliament after the EUs confirmation of the backup plan. It is not clear how long the discussions with the EU will last, and the process of discussions with the EU will determine when the agreement will be returned to the House of Commons for voting.
On November 25, the leaders of EU Member States formally adopted the previous de-EU agreement with Britain at the EU special summit held in Brussels. After crossing the EU step, the domestic parliamentary vote was considered to be the most critical challenge for the government of Teresa May. The delay in voting has again raised concerns about Britains non-agreement to leave Europe.
On November 25, only the EU agreed on the text of the draft agreement. Before signing the agreement, it still needs to be voted by the parliaments of the UK and other EU member states. Even if the agreement is voted through in the British Parliament, it will need to be passed by other EU member states separately. If Britain fails to reach a consensus with the EU, it will still be possible to disengage from Europe hard, that is, no agreement to disengage from Europe.
On December 10, the European Court ruled that the British government could unilaterally withdraw its decision to withdraw from the EU without consulting other EU member states. If withdrawn, the UK would still enjoy its existing rights as a member of the EU. Before leaving the EU formally on March 29, 2019, Britain can withdraw its request at any time as long as the de-EU agreement signed between the EU and the UK has not yet entered into force or reached such an agreement. At present, there are still many parties opposing the EU agreement in Britain. The ruling of the European Court gives Britain a chance to repent and increases the hope of the opposition camp.
In an open letter, British Prime Minister Teresa May appealed to the British people to support the de-Europe agreement. But according to foreign media reports, BMGResearch, a polling company, found that the proportion of people who support staying in the EU has increased month by month since this summer, and the proportion of people who support staying in Europe has climbed to 52% so far.
Analysis: If there is depreciation pressure on UK emerging market currencies to break away from Europe
The revival of the process of decoupling from Europe has caused great shocks in British financial markets. At about 19:30 p.m. Beijing time on Dec. 10, the pound fell 20 points against the dollar and missed the 1.27 barrier after news that the vote on the Euro-withdrawal agreement would be delayed was reported by many media. After confirmation of the news, the pound continued to fall against the dollar, expanding its decline to 1.6%, reaching its lowest level since April 2017 at around 23:58, to 1.2523. On the 11th, the pound still fluctuated at a low level of 1.25 against the dollar, reaching a minimum of 1.2552 and a maximum of 1.2583.
The pound fell sharply while the dollar strengthened. On the evening of the 10th day, the dollar index rose more than 20 points in the short-term and rose 0.3% in the day, reaching 97. On the 10th day, it closed up 0.44% to 97.2099. On November 11, the dollar index remained above 97, reaching a peak of 97.2341.
Due to the rise of the US dollar index, the spot exchange rates of onshore RMB and offshore RMB against the US dollar declined. On Monday, the onshore Renminbi closed at 6.9135 against the dollar at 16:30, a new week low, down 337 basis points from the previous trading day, and the offshore renminbi closed down 283 basis points. On November 11th, the intermediate exchange rate of RMB against US dollar was 6.8996, down 303 basis points from the previous trading day, the fourth consecutive trading day.
Wang Qing, chief Macro Analyst of Oriental Jincheng, told Xinjing News that since the UKs exit from Europe had already begun, the event had been digested in advance by the international capital market, so the impact of the formal exit on the pound and global exchange markets was relatively limited. However, if Britain breaks away from Europe, the British recession will further push the pound down sharply, and the exchange rate of the pound against the U.S. dollar is likely to fall from around 1.30 to below 1.20. The depreciation of the pound will drive up the dollar index, which will bring some depreciation pressure to emerging market currencies, including the RMB.
On the stock market, the FTSE 100 closed down 0.83% at 6721.54 on Monday. Since the beginning of the year, the FTSE 100 index has fallen by 12.57%.
The market believes that the final outcome of the UKs delisting is still uncertain. It is possible that the agreement will be delisted. However, the probability that the agreement will not be passed by the British Parliament, open a second referendum or leave the EU without agreement is also high. Therefore, the UK foreign exchange market and stock market are still facing greater uncertainties.
The attractiveness of the UK stock market has declined since the UK officially announced that it will launch the process of decoupling from Europe. At present, the main risk point comes from hard disengagement. Wang Qing said that if Britain leaves Europe without agreement, it will trigger a sharp fall in British stock markets, which will further boost the volatility of global stock markets. Risk sentiment may also be transmitted to the domestic capital market in the short term, resulting in pressure on the domestic stock market.
Source: Han Jiapeng_NN9841, responsible editor of Beijing News