MARKETVIEWMARKETECONOMICS|G10INTERESTRATES|G10FXKEYMESSAGESAfterthelatestBrexitvotesintheUKparliament,wearewhereweexpectedtobeattheendofthisweek,albeitalongafairlyturbulentpoliticalpath.Weretainourlong-heldviewthatArticle50willbeextended,mostlikelyforashortperiod,followedultimatelybyaratifieddeal.Thisweek’sdevelopmentshavereducedtheprobabilityoftheUKleavingtheEUwithoutadeal,inourview,fromabout25%to20%–butweexpectplentyofpoliticalnoiseoverthenextfewweeks.FLASH|EUROPE14March2019UnionistPartyalliesaresofteningtheirstance.Butwealsoseereasonswhythegovernment’sthirdattempttopushthroughthedealmightfail.Thegovernmenthaspromisedthatifthedealfailsnextweek,itwillholdasetof‘indicativevotes’onvariousBrexitoptionson25March,atwhichpoint,theEUmayhaveprovidedfurtherinformationontheconditionsattachedtoanyextension.SomeMPsmightwanttowaitforthisinformation.SomeEuroscepticMPsmightbereconcilingthemselvestothedealbasedonhopesthattheattorneygeneralwillchangehislegaladvicetoemphasisetheUK’sabilitytoinvokeinternationallawtoescapethecontroversialbackstopprovisionsrelatingtotheUK–Irelandborder.However,thiswouldbelikelytoreceiveshortshriftintheEUandbesubjecttolegaldisputes.Extendforwhat?Wethinkthemostlikelyoutcomeremainsadealandatwo-tothree-monthextension.MPscouldpassthedealonafourth‘meaningfulvote’iftheycannotfindaconsensusforanalternativerouteoriftheEUposesunpalatableconditionsonanextension(eg,itsduration).IfMPsdofindaconsensusforchangestothepoliticaldeclaration(eg,asofterBrexit),thatwouldalsorequireonlyashortextension.Failingthat,wethinkalongerextensionofArticle50ismorelikelythannodeal.CommentsbyEUCouncilPresidentDonaldTusksuggestthatthebartoalongextensionisnotthathigh.Theprobabilities,inourview,standat15%forrevokingArticle50(unchangedfromourpreviousassessment),65%foraBrexitdeal(+5pp)and20%forano-dealBrexit(−5pp).PaulHollingsworth,UKEconomist|ParishaSaimbi,G10FXandSterlingRatesStrategist|BNPParibasLondonBranchPleaserefertoimportantinformationattheendofthisreportBrexit–T...
