UK Parliament’s February recess this week has provided something of a rarity since June of last year – a week with very little mention of Brexit arising in both research releases and the media.

The lack of chatter may come as welcome relief for those that are already sick of the subject, even before we reach the triggering of Article 50 and a jump into the unknown. In fact, Sterling has been trading close to 2017 highs against its European counterpart while trading in a much narrower range against the US dollar throughout the week as the ‘B’ word has been temporarily forgotten.

However, this is only set to last for another two trading sessions before Parliament returns from their (well earned?) break on Monday and we begin the parliamentary pantomime all over again.

Monday (20 February) sees the House of Lords begin their Article 50 amendment process, with debates taking place on Monday and Tuesday before the vote to pass the bill onto the committee stage takes place on Tuesday evening. This committee phase then takes place on the following Monday and Tuesday (27-28 February) where amendments are proposed and voted on. If amendments are made, this would then see the bill passed back to MPs for their approval.

Despite the Commons passing the bill without any amendments being voted for and with very little opposition to the majority of the amendments that were proposed, the Lords could end up being an entirely different affair.

As unelected officials, many in the House will be unwilling to tip the boat too much for fear of provoking abolishment calls. Although with that said, the saga may play out in an entirely different manner as peers, some of whom sit in the House due to non-political engagements while others act as crossbenchers, act in what they perceive as best for the country rather than pandering to the will of voters. Furthermore, the Conservative majority is significantly less in the Lords, while other parties that are underrepresented in the Commons (most notably the Liberal Democrats, who voted against the bill under instructions from party leader Time Fallon last week) have a considerably larger representation. This could see opposition to Brexit voiced much louder than we saw in parliament last week, as peers voice their honest opinions without fear of reprisal from voters.

As a result, the amendment process in the upper house may be considerably more lengthy than last week’s swift affair by MPs, with many proposed changes to the bill that were defeated in the Commons accepted by Lords. Even Brexit Secretary David Davis has stated that triggering Article 50 could be severely delayed by the House of Lords, as a ‘ping pong match’ begins between the peers and their elected counterparts in the lower house, sending the bill to and fro as MPs and Lords disagree on amendments. He estimates that Government’s target of enacting Article 50 in early March could be pushed back to late March, or perhaps further still. This would provide the PM and her cabinet with the latest in a series of headaches; having already conceded in consenting to a vote in the first place, the opposition to her plans to just get on with it .

Sterling could subsequently be subject to much larger swings than we have seen this week as the remain camp falls upon its last line of defence, impacting foreign exchange markets as well as the UK 100 and 250 as currencies engage in their latest tug-of-war. But, for the next two days at least, this is an afterthought as we enjoy the silence of a half-term government holiday. So in the mean time, enjoy the relative market calm before we go back over the top next week.

Henry Croft, Research Analyst, 16 February 2017