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Heads up, forex chaps! British MPs will be voting on the Queen’s speech tomorrow, so there’s a chance that the pound may get a volatility infusion.

What’s this vote all about, you ask? And why does it matter for the pound? Well, today’s Q&A will address those questions.

Queen’s Speech? What’s that?

The Queen gave a speech last Wednesday (June 21), marking the official start of the Parliamentary year.

The Queen’s Speech, which is actually written by government ministers, lists down the legislative agenda for the year, including the Bills that Theresa May’s Conservative Party wants Parliament to pass.

There were lots of Bills mentioned or hinted at in the Queen’s Speech, but the ones related to Brexit are as follows:

  • A repeal bill meant to, well, repeal the European Communities Act 1972, which is the legislation that made the U.K. part of the E.U.
  • A customs bill, which will replace current E.U. customs rules
  • A trade bill since the U.K. will become free to set its own trade policy after Brexit
  • An immigration bill, which will let the U.K. set its own immigration policy
  • An international sanctions bill because the U.K. has imposed 34 international sanctions under E.U. rules and these need to be taken into account if the U.K. wants to meet its national security and international policy obligations.
  • An agriculture bill meant to provide support for British farmers after the U.K. sheds E.U. policies.
  • A fisheries bills since the E.U. currently has control of the U.K.’s fishing quotas
  • A nuclear safeguards bill since the U.K. will no longer be part of the European Atomic Energy Community and will therefore no longer be bound by the Euratom Treaty for peaceful use of nuclear energy.

Among the above-mentioned bills, the customs bill and the trade bill will probably face the greatest opposition since some MPs want the U.K. to remain in the E.U. customs union and the E.U. single market respectively.

When will MPs vote on the Queen’s Speech?

There is no set time, but the vote on the Queen’s Speech itself is scheduled for Thursday. Parliament has other business to attend to on Thursday, so the final debate and vote on the Queen’s Speech will likely happen between 11:30 am BST and 7:00 pm BST (10:30 am GMT and 6:00 pm GMT).

However, there’s also going to be a vote on amendments to the Queen’s Speech later today. And as Labour leader Jeremy Corbyn puts it (as cited in a BBC article), the amendments present “a ‘test case’ of MPs’ willingness to oppose further austerity measures,” which will test the unity of the Conservative Party.

Why is the vote important?

The vote on the Queen’s Speech will be seen as a test of the Conservative Party’s unity and Theresa May’s ability to muster enough votes to push through with her agenda.

If Theresa May loses the vote, she’s not actually required to resign as Prime Minister because the Fixed-Term Parliaments Act of 2011 mandates that she will only be forced to resign if there’s a vote of no confidence.

However, as London School of Economics Professor Patrick Dunleavy points out, the political pressure to quit would be so strong that “At that point, Theresa May would have to resign but it is not clear that we would have to have another election.”

It should be mentioned, however, that the chance that Theresa May will lose the vote has diminished a bit, thanks to news on Monday that the Conservatives and the Democratic Unionist Party (DUP) of Northern Ireland have struck a so-called “confidence and supply” deal after the Conservatives agreed to increase financial support for Northern Ireland to the tune of £1 billion.

And such a deal includes a promise that the DUP will use its 10 seats in Parliament to supplement the Conservative Party’s 317 seats during the Queen’s Speech votes.

Even so, Theresa May still has a chance to lose the vote.

Moreover, Labour leader Jeremy Corbyn hasn’t stopped from threatening that he will do what he can to make Theresa May lose the vote. And aside from promising to vote down the Queen’s Speech itself, one of Corbyn’s plans apparently includes tabling amendments that are meant to divide the Conservative vote, as mentioned earlier.

How may the pound react?

If Theresa May loses the vote, then there’s a higher-than-average chance that the pound will react negatively as a knee-jerk reaction since May’s defeat would be a sign of instability in the U.K. government and would also reignite Brexit-related concerns.

If the Queen’s Speech gets passed, however, then the pound’s reaction is harder to anticipate since it’s very likely that traders have already priced-in such a scenario, given the deal between the Conservative Party and the DUP.

If that is indeed the case, then the event will likely be a dud or only cause demand for the pound to ramp up slightly. But if the event hasn’t been fully priced-in yet, then the pound will probably jump higher.