With Prime Minister May's exit deal appearing dead on arrival in Commons on Tuesday markets are betting that the next move in the Brexit saga will be a delay in the EU departure date of March 29th.
The pound rose almost 1% to 1.2866 in New York trading, its best against the dollar since November 23 as the the Evening Standard newspaper cited unidentified cabinet ministers saying a delay in the departure date was becoming likely.
The sterling closed just over 20 points lower at 1.2845 after the government denied the report. The sterling was up 0.7% on the day and 2.8% from its 20 month low of 1.2497 on December 11th.
If May's Brexit deal fails the immediate choices for the British government are few. The administration can prepare the country for a non-negotiated exit from the EU or it can ask for a delay on the March 29th date to consider its options. It is likely that a postponement request to the EU Commission would be swiftly granted.
The majority of Parliament opposes a so called no-deal exit. If the delay is granted the choices for Ms May's government range from canceling the proposed exit and remaining in the EU, attempting yet again to obtain better terms from the EU Commission, to a second referendum or a general election.
None of these options except perhaps the renegotiation if the EU decided to cede terms could be accomplished before the March 29th exit.
Ms May is seeking legal reassurance that the UK will be able to leave the customs backstop designed to prevent a hard border between Ireland and Northern Ireland, unilaterally or with a preset termination date if trade talks fail to produce an alternative.
The EU has said the 585 page treaty cannot be changed and the EU Commission has been reluctant to write a legally binding interpretation of its terms. However, Leo Varadakar the Irish Prime Minister said recently that the EU is willing to offer new "written guarantees, explanations and assurances" to help Ms May win Parliamentary approval.
Ms May could force a second or even third vote on her deal in the hope that enough MPs would join to prevent the only other option on offer so far of a hard exit. The Parliamentary motion containing the bill would have to be altered in some fashion before a second vote.
The coming reassessment of the Brexit agreement and for many the entire departure necessitates a delay of several months at the least. But with Ms May still pushing for approval no request to the EU for a delay will happen until her Brexit deal is conclusively finished.
Against the euro, the pound closed at 0.8923 up 1% and 98 points on the day and the best level since December 7th. It has gained 1.3% since it closed at 0.9041 on December 10th.
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