U.K. Prime Minister Theresa May was left fighting for her political life Tuesday as she began a series of eleventh hour pleas to EU leaders for further assurances on Brexit deal that has little support at home and little desire from change from Brussels.
May called off a key Parliamentary vote on her torturously-agreed Brexit deal Monday that would have seen her facing a humiliating defeat in the House of Commons and possibly trigger either a leadership challenge or even fresh national elections. Both of those fates, as well as the prospect of a so-called "no deal" Brexit, are still very much alive a May attempts to get last-minute support from EU leaders while lawmakers in London plan an emergency parliamentary debate that could result in a vote of no-confidence in the Prime Minister.
"It is not clear what assurances May hopes to acquire in her four day trip across Europe and it would seem unlikely that whatever she secures is enough to win support in parliament for her withdrawal deal," said ING's global head of strategy Chris Turner, who added that the pound "looks incredibly vulnerable to most scenarios."
The pound was marked around 0.82% higher from overnight levels in Asia trade that saw sterling fall past a 20-month low against the U.S. dollar to 1.2505 after May abandoned her long-planned vote just hours after the European Court of Justice ruled that Britain could unilaterally stop the entire Brexit process and remain a member of the world's biggest trading bloc.
May will meet with Dutch Prime Minister Mark Rutte, as well as German Chancellor Angela Merke, later today and has a series of high-level meetings planned to follow, in the hope that she can get more detailed assurances on the main sticking point of her Brexit framework: the so-called Irish backstop.
In essence, the backstop is a portion of the agreement that commits both the U.K. and the EU to the prevention of "hard border" between the Republic of Ireland (and EU member state) and Northern Ireland, a U.K. territory, should trade talks fall down and Britain leaves the Customs Union of the bloc.
Brexit supporters don't like the backstop agreement because Britain can't unilaterally exit from it, while Brexit opponents say the fact that it's needed in the first place suggests the Brexit deal offered to the public in the 2016 referendum simply can't be delivered.
EU leaders have said they're happy to help with "clarification" on the backstop, but have uniformly insisted that it is too late to change the text of the 585-page deal struck with May last month.
The stance not only puts May in the impossible position of extracting changes from one side that refuses to give them, while failing to satisfy lawmakers at home that wouldn't accept them anyway, but it also creates tremendous difficult for opposition Labour leader Jeremy Corbyn, who has insisted that he can re-negotiation Britain's EU exit.
Corbyn has the chance to test his thesis today, or over the near term, if he tables a vote of no-confidence and asks lawmakers to topple May from her Premiership. Such a vote wouldn't automatically mean he would ascend to Prime Minister -- that would likely require a national election -- but it could unsettle what little stability is left in Parliament, and indeed the broader government, and add further volatility concerns around U.K. finance assets.
Time, furthermore, is not on anyone's side: Britain needs to have a final Parliamentary verdict by no later than January 21, and is set by law to leave the bloc completely on March 29.