Login Open account
Hong Kong S.A.R
Macro Digest: UK government suffers historic loss Macro Digest: UK government suffers historic loss Macro Digest: UK government suffers historic loss

Macro Digest: UK government suffers historic loss

Macro 6 minutes to read
Steen Jakobsen

Chief Investment Officer

Summary:  Saxo Bank Chief Economist Steen Jakobsen analyses the state of play in Brexit following PM May's historic Parliamentary loss.

UK Prime Minister Theresa May saw her already controversial Brexit bill roundly and conclusively defeated in Parliament Tuesday evening with uncertainty on the future of both her government and Brexit itself dominating sentiment into today's vote of no confidence.

Here is how we see the state of play from here.

Market reaction

• GBPUSD almost unchanged with a small overnight rise leaving it at 1.2861 in the wake of today's opening bell.

• We look to tactically sell GBPUSD towards 1.2880/1.2900 as the market is over-interpreting the likelihood of no Brexit (stop loss 100 pips).

• We estimate the most likely event to be a general election called before the end of next week. The Tories will be judged “guilty” in failing to deliver the British public vote and will be seen as destructive for the UK economy; we still see the UK, together with Germany, as having the biggest risk of recession in 2019.

Analysis

PM May’s final attempt to get her deal through failed – she lost a massive 230 votes. May accepted defeat and also accepted the tabled debate of a “vote of confidence” set to happen today.

She also offered the following guarantees:

She will honour the votes of June 2016.

• The government will openly listen to solutions to solve the impasse.

•  The UK will stand by Northern Ireland and the Good Friday agreement.

The Financial Times' Henry Mance says that 196 Tory MPs voted with May, but 118 voted against. Only three Labour MPs voted for the deal and 248 voted against.

As expected, the Scottish National party (35 MPs), the Democratic Unionist party (10) and the Liberal Democrats (11) all voted against. The decision was overwhelming.

In terms of the “no-confidence debate”, it will most likely fail, but May is now more likely than not to call a general election as her “exit routes” are now fully blocked. She suffers from a lack of political capital in both Parliament and Europe.

Several European Union leaders are already out escalating the preparations for hard exit. Mind you, there is still less than a 10% probability of this happening.

The most likely path from here is:

•  A vote of confidence debate tomorrow, where PM May and her government will prevail.

•  A failed “spring” to secure extension/improvement of the deal, which will fail.

•  By the end of next week we will be in "full general election" mode and the EU will meet in late January to extend the Brexit deadline, most likely from March to the end of 2019.

Conclusion

• The market is too optimistic on a second referendum, naively thinking the chance of a no-Brexit outcome is now more likely, but listening to and analysing today’s comments I feel less certain that a second referendum will happen. The British publish doesn’t want it, according to a YouGOV poll conducted Tuesday morning (just 8% say Yes) and Parliament is “eager not to betray the June 2016 vote".

• A general election called after a short week of exploratory talks with a full Parliament.

• An extension of the March deadline by the EU Council of Ministers... despite all their harsh talk.

• No hard Brexit – which would hurt both UK and the EU.

• GBP targeting 1.2000 in its run into the UK election.

Quarterly Outlook 2024 Q2

2024: The wasted year

01 / 07

Macro: It’s all about elections and keeping status quo

Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.

Read article

FX: The rate cut race shifts into high gear

As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.

Read article

FX: High yielding currencies will start losing their appeal

Uncover the shifting focus in 2024's FX markets towards growth resilience and relativity, away from bond yields and inflation stories.

Read article

Commodities: Year of the metals

Embrace the metal revolution on the commodity market in the coming year, with a focus on gold, silver, platinum, copper, and aluminum.

Read article

Macro: What happened to the future?

The gloominess of geopolitical conflicts and the repetitive nature of political agendas. What else does 2024 hold in store for us?

Read article

The rise of populism: Far-right parties will influence the future

The disheartening cycle of unresolved geopolitical conflicts, the rise of polarizing political parties, and the stagnation of productivity.

Read article

Investing in China: Navigating Q1 amid economic challenges

Understand China's political landscape in Q4 2023 and the impact on counter-cyclical initiatives, with a focus on the pivotal Q1 2024.

Read article

  • Macro: It’s all about elections and keeping status quo

    Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.

    Read article

  • FX: The rate cut race shifts into high gear

    As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.

    Read article

  • FX: High yielding currencies will start losing their appeal

    Uncover the shifting focus in 2024's FX markets towards growth resilience and relativity, away from bond yields and inflation stories.

    Read article

  • Commodities: Year of the metals

    Embrace the metal revolution on the commodity market in the coming year, with a focus on gold, silver, platinum, copper, and aluminum.

    Read article

  • Macro: What happened to the future?

    The gloominess of geopolitical conflicts and the repetitive nature of political agendas. What else does 2024 hold in store for us?

    Read article

  • The rise of populism: Far-right parties will influence the future

    The disheartening cycle of unresolved geopolitical conflicts, the rise of polarizing political parties, and the stagnation of productivity.

    Read article

  • Investing in China: Navigating Q1 amid economic challenges

    Understand China's political landscape in Q4 2023 and the impact on counter-cyclical initiatives, with a focus on the pivotal Q1 2024.

    Read article
Disclaimer

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R
Products & pricing
Asset Management
Platforms
Accounts & service
General
Other
Legal

Losses can exceed deposits on margin products. Please ensure you understand the risks.

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-hk/about-us/awards.

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.