You have to give it to Theresa May. She’s not a great public speaker, she certainly can’t dance and she’s struggled to unite the warring factions of her party, yet more than two years on from her appointment as UK prime minister and the task of taking on the Brexit chalice, she’s still standing, still fighting and still in with an even chance of pulling off a version of her so-called ‘Chequers’ deal that, one month ago, looked to be in tatters.
You might not have put money on that a few days ago. It looked like it could be all over for the beleaguered PM when, already walking a knife edge, transport minister Jo Johnson delivered the most surgical of strikes with his resignation on November 9 in tandem with a brutal attack on her whole Brexit strategy. In a resignation letter, he branded the deal “a con”, stating “the choice being presented to the British people is no choice at all” adding that the current juncture represents “a failure of British statecraft on a scale unseen since the Suez crisis”.
Lest we forget, Johnson is brother to May’s arch-nemesis Boris, but there, aside from the shock of blond hair, do the similarities end. Johnson, the younger incarnation that is, voted remain. He’s earned a reputation as a left-leaner, shuns the limelight, is pro-European and, reports the Financial Times, is “extremely cautious”. Less Boris-like traits you would be hard pushed to find.
But for May, that made his attack even more perilous. Johnson comes from the other side of the spectrum to his more flamboyant sibling and in one swift moment, crystallized perfectly just how much her proposed deal had antagonised all parts of the party. It left the British PM treading the thinnest of lines between success and disaster.
So, when markets opened Monday with sterling plummeting towards a 100-plus pips fall, it looked like the PM might be on her last legs. GBP/USD was above 1.31 Thursday but dipped below 1.285 Monday and was still lingering below the 1.29 handle Tuesday morning.
And yet, that slide might have been worse. Talks have edged ever closer to the finishing line helping to arrest the fall, after tortuous negotiations into the early hours of Monday morning resulted in the crossing of numerous ‘T’s and the dotting of more than a few ‘I’s.
The EU’s chief Brexit negotiator Michel Barnier even gave sterling a fillip Monday afternoon when he said “the parameters of a possible deal are very largely defined.” His message was reinforced Tuesday morning by de facto deputy prime minister David Lidington who declared a deal is “within touching distance.”
And as for May, her position once again has been bolstered, just when it looked most under threat.
“A ‘deal’ within 24 hours would lead to an extraordinary meeting in November with the EU leaders,” says Nordea’s Brexit expert Morten Lund. “If there is a sign-off, then it has to be approved in the EU and UK parliaments after a ratification process.”
“In terms of May’s position, I don’t think it will be threatened in the very short run even if we don’t get an agreement within 24 hours,” he says. “I think she at least will be given the chance to negotiate a deal towards the December meeting.”
December is, of course, one thing. March 29 is another. Is she still on course to steer the country through to the Brexit deadline and beyond? Lund thinks so, although he’s a tad more nuanced than when Nordea Markets interviewed him six weeks ago as part of our Thought Leadership series.
“It is our base case that a deal will get through with May as PM. However, the pressure is of course increasing, as well as the likelihood of her not being PM after March 29,” he says.
And with gambling very much the theme of the moment, then a flutter might be just up your street, says Lund.
“A fun note on that is that betting markets are currently pricing in 91% on May still being in office on December 31.”
It won’t be the first time Britain’s gambled of course. Ask Winston Churchill. He pulled it off with his Dunkirk speech in 1941. Anthony Eden conversely took a punt over Suez in 1956 and failed badly. Dismally if truth be told. What way will it go for May?
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