The pound has become something of a Brexit bellwether.
Ever since the referendum, the currency has tracked political developments and the value of sterling fell sharply when Dominic Raab resigned this morning before stabilising as Theresa May began her statement to the Commons.
At the time of writing the share price of UK banks (RBS, Lloyds, Barclays) house builders (Persimmon, Taylor Wimpey, Barratt) and retailers (Tesco, M&S) have plunged.
The market moves suggest a growing feeling among investors that Theresa May’s draft deal will unravel. But it’s also worth noting that they don’t appear to be betting an alternative outcome.
If the currency markets really assumed that an abrupt, chaotic departure from the European Union is now more likely than not then sterling would surely be in its knees.
Neither No Deal nor a second referendum is obviously priced in.
- Chris Beauchamp, Market Analyst at IG Group:
What do the markets know? Not much more than us, in all honesty.
Investors have no special knowledge or insight and - as the referendum demonstrated - they often bet the wrong way. But sentiment matters all the same.
This morning’s market movements are country-mile short of meltdown. The prime minister will be unflustered. But should the pound suddenly head south in the weeks ahead, then pressure on the government would be irresistible.
Theresa May is likely to be more concerned by the reticence of business. She will have been hoping that a series of big names would endorse her draft agreement - not least the FTSE100 chief executives that now make up her Post-Brexit Business Council.
Sir Roger Carr of BAE had a go at sounding upbeat on the Today program this morning, describing it a “much, much better than the chaos of no decision”.
But the heads of GSK, Rolls Royce, Timpson, BT, ITV, Prudential and Santander have, so far, been extremely quiet.
- Andy Palmer, president of Aston Martin:
Airbus - which you will recall has threatened to cut back its operations if our future trading relationship with the EU remained opaque - described the draft deal as a “welcome first step” - but insists there’s “much work to do”, and points out that the company still “can’t properly plan for the future”.
That’s pretty faint praise indeed.
Andy Palmer of the luxury car-maker Aston Martin has backed the draft agreement enthusiastically, although he - sensibly - continues to plan for No Deal.
The boss of Jaguar Land Rover, Ralf Speth, ignored our questions as he arrived at BEIS for an Auto Council meeting this morning.
He has previously warned that “tens of thousands of jobs” depend on the government securing a good deal.
His silence invites us to believe he doesn’t think much of the one they’ve managed.
Of course, the issue here is that most businesses desperately want Britain to remain in the EU.
Chief executives will happily declare the draft deal is better than no deal because they believe no deal would now be catastrophic. However, they struggle to heartily embrace an agreement which, deep down, they feel leaves their businesses worse off than they are now.
For many companies, Brexit is a regrettable exercise in damage limitation.
The Political Declaration commits Britain to the single market and the customs union until 2020; thereafter, the nature of our trading relationship with EU remains vague and aspirational.
Another reason business leaders may be keeping their heads down is that they are watching events unfold in Westminster.
Is it worth publicly speaking up for a draft agreement that looks unlikely to clear the Commons? There’s the obvious risk of humiliation if they do.