In the era of Wikileaks and hacked emails, a memo leaked from Conservative Prime Minister Theresa May's office on Tuesday cast into doubt her government's ability to take the U.K. out of the European Union (EU).
December futures for the pound sterling opened on the CME Globex at 1.2454, reaching a high of 1.2489 with a low of 1.2444 in London by mid-day. March 2017 futures broke 1.25, reaching 1.2509 before then falling to a low of 1.2478 amid a Greenback rally.
May has publicly announced that she will invoke Article 50 of the 2009 Lisbon Treaty at the end of March 2017, triggering what has been described as a "hard Brexit," where the U.K. would begin its exit from the EU--and a negotiation with the EU's 27 member nations on the process. This would mark the formal notification of the U.K.'s intention to withdraw. Unless it goes off the rails, the Brexit train wouldn't officially leave the station by April 2019. Meanwhile, Supreme Court Judge Lady Hale Wednesday said "comprehensive" legislation would be needed before the negotiation could even begin.
The leaked memo betrayed turmoil inside 10 Downing Street, and raised concerns that the UK has no hard and fast plan in place to implement June's vote to leave the EU. Such a plan, which would be brought to the negotiation with the EU's member nations, may be at least six months off. March 31 is less than five months away.
The Guardian reported that the leaked memo was written by a Deloitte consultant, which was confirmed by Deloitte spokesperson Mark Smith, adding that it was not commissioned by the government or composed with the use of government information.
Brexit poses an "existential threat" to operations in some departments in Whitehall, a metonym for the British government's bureaucracy, according to warnings highlighted by a leading think tank. Based on the current headcount, staffers in cash-strapped government departments would have to moved to work on Brexit.The London-based Institute for Government said that Theresa May's "secretive approach" was hampering preparations to leave the EU and that 30,000 civil servants would need to be hired in order to effect the Brexit transition. As with the Deloitte, the Institute for Government, which has close ties to the civil service, also cautioned that the Brexit process appeared "chaotic and dysfunctional."
The Brexit turmoil has not been a tonic for the Pound Sterling and long-term GBP sentiment remains mainly bearish. "Our base case is that the Brexit negotiation process will not be easy, and the uncertainty will continue," said David Bloom, global head of FX strategy at HSBC in an outlook report on G-10 currencies. "We therefore continue to see significant downside risks for sterling and forecast GBP/USD at 1.20 for year-end 2016 and 1.10 for year-end 2017."