If there’s one thing I dislike is being held in suspense, and this is exactly what the Brexit process is doing. Ever since the 23rd June referendum in 2016, there has been no significant move to get Brexit going. Sure, no one expected it to be a quick process, but this is just taking too long. (See how Brexit affected Forex trading)
The first hurdle was the resignation of then Prime Minister David Cameron who stepped down about a month after the referendum on the 13th of July 2016 as Theresa May was sworn in. The Brexit Secretary office was also created soon afterward, and the Secretary, David Davis, was supposed to oversee the process. Initially, Theresa May stated that Article 50 would be triggered by the end of March 2017, but the Brexit process seems to have met some resistance.
Article 50 is part of the Treaty of Lisbon which came into effect in 2009 and brought the EU countries together. It is the bit in the treaty which dictates the process any EU member would have to go through to leave the union. Once Article 50 is triggered, the completion of Brexit is expected to take about 2 years, so the expectation was to have the UK completely free by April 2019. Keep in mind these are only estimates because there has never been an EU nation that voted to leave the EU, so there is no definite figure on the time it will take.
Hurdles to the Brexit
The process of triggering Article 50 has not been smooth because there have been people opposed to the referendum. A good example is former Prime Minister Tony Blair who went as far as to suggest a second referendum. In October 2016, he argued that the voters may need a second referendum so that they can make a decision knowing just how disastrous a Brexit would be to UK’s economy. Even so, the suggestion remained just that, a suggestion and the government insisted it would honor the wishes of the people.
These utterances by Blair did not even slow down the process, but there were some major hurdles ahead.
Supreme Court ruling
When the office of the Brexit Secretary was created, the understanding was that the government was in charge of triggering Article 50. Then came a major hurdle when the Supreme Court of the UK was forced to make a ruling on who would be in charge of the process. According to detractors of the Brexit referendum, details of Article 50 were unclear as to how and who was supposed to manage the process, so the Supreme Court had to step in.
It began soon after the referendum when Gina Miller took to the High Court asking that parliament intervene in Article 50’s implementation. The ruling was made in her favor on the 3rd of November 2016, and that caused a spike in the pound’s strength. Of course, the government didn’t take it lying down, and that’s how the case got to the Supreme Court.
The judges of the Supreme Court ruled that Article 50 should be passed by parliament first before the government begins negotiations with the EU. The reasoning behind the ruling had to do with Brexit’s impact on UK law. Since Brexit would change some UK laws, it would be necessary for parliament to consent, since it is their job to do so.
With the ball in the parliament’s court, the MPs now have the power to make amendments, accept or even reverse the decision. For the latter option, reversing the decision, it has been made clear by MPs from all parties that this won’t happen. They are choosing to honor the people’s will and we can expect that Article 50 will come out of the other end. Nevertheless, they are not bound by the April 2017 deadline Theresa May set for herself, and they can choose to drag on the debate for as long as they like.
Adding the parliamentary process to the Brexit process may cause delays because MPs will want to make amendments to Article 50. The Labour Party leader Jeremy Corbyn stated in no indefinite terms that they (MPs) would seek 2 main amendments. The Article 50 bill has already been passed by the House of Commons and is now in the House of Lords. By all measures, the bill seems to be going along well so far, but you can never know, and now there’s just one month left till we get to April 2017.
Negotiations with the EU
This will be the hardest part. The UK’s decision to leave the EU has not been taken very well with the remaining EU nations. The situation is exacerbated by Theresa May’s tough talk about a ‘hard Brexit’ which would leave both parties with stiff measures against one another. We cannot say for sure yet because it hasn’t happened, but you can expect that there will be plenty of hurdles within the negotiation process. However, since this is where we have headed anyway, shouldn’t we just get on with it already?
Why do we need to get over it?
At the moment, there has been a marked increase in volatility with the sterling pound. The uncertainty created by the pending Brexit decisions has created a very volatile environment that makes trading any currency paired with the pound in it risky. Just look at this screenshot of one of the Forex charts:
As you can see, the average daily range (ADR) is quite high compared to the months before the Brexit referendum. I’m sure some traders love this chaos, and it does present the opportunity for big gains, but many traders are not drawn to this. (10 steps of successful traders)
Such high volatility levels create very risky trading conditions where you can never really predict how the markets will move based only on technical analysis. Instead, you need to be aware of every tiny detail happening in the UK to trade effectively (Comparing fundamental and technical analysis). The problem is that most political events affecting the sterling pound will not even be listed on the Forex calendar.
This is why many traders would be relieved if the Brexit process was done away with ASAP so we can finally get a handle on the sterling pound.