The Brexit season finale
Today's news headlines:
- ‘Trump’s Ukraine envoy emerges as biggest impeachment threat'. The head of Ukraine’s US embassy, William Taylor, has provided a detailed statement in what has become one of the biggest threats for Trump’s impeachment. The 15-page document is based on first-hand conversations and detailed notes, providing a clear account of the President using foreign aid as leverage to be granted political favours. (Bloomberg)
- ‘Canada’s Trudeau keeps the wheel but prepares to turn left'. Canadian Prime Minister, Justin Trudeau, is facing pressure in a minority government to tilt towards left-leaning policy. Trudeau lost support in Monday’s election, and although his Liberal Party retained power, support from the New Democratic Party risks upsetting businesses and oil-producing provinces as both parties work together in the future. (Reuters)
Waiting for the fog to clear
Fifteen minutes of joy, or relief? That’s all we got last night when MPs finally, and historically, voted in favour of a specific plan for the UK to leave the European Union. At 7pm on Tuesday, Boris Johnson’s withdrawal agreement bill achieved a 30-vote majority in the House of Commons. A significant victory for the Prime Minister when taking into consideration that his predecessor’s version was comfortably defeated no fewer than three times. But, the joy was short-lived. MPs rejected the government’s plan to expedite the bill into law before the third Brexit deadline on October 31st 2019. Earlier in the day, Johnson had threatened to pull the legislation and pursue a general election if the timetable vote didn’t go his way; instead, he struck a more conciliatory tone in defeat. The Prime Minister told Parliament: ‘One way or another, we will leave the EU with this deal, to which this House has just given its assent,’ but didn’t repeat his threat to press forward with an election.
Lawmakers might eventually decide that Johnson’s plan is an acceptable alternative to further months of uncertainty and delay. Setting Brexit-exhaustion aside and thinking rationally, rushing this deal through Parliament in just three days does nothing more than fulfil the PM’s promise to deliver Brexit ‘do or die’ by October 31st. The most likely path forward is that Johnson works to pass his deal through the Parliamentary process, albeit in more than just a few days, with the possibility of an exit in several weeks.
Bottom line: Despite last night’s defeat, Sterling looks set to hold onto much of its recent rally, mainly because the threat of a general election is likely to focus on the passage of the current deal rather than the previous threat of a no-deal exit. For now, we’ll wait for the fog to clear while the government decides how it’ll go about achieving full Parliamentary approval for Johnson’s deal.
Cable touched 1.30 last night before dipping back below 1.29 following Parliamentary votes on Brexit. Options markets have priced in lower short-term volatility for the pair as the UK awaits the EU’s response to its extension request.
The pair has fallen from its 1.1660 resistance level following Parliamentary votes last night finding support at 1.1550. Short-term Sterling volatility is expected to fall, meaning the Euro may be more influential for the currency cross in the short-run.
The common currency has slid lower in recent sessions after reaching highs of 1.1179 on Monday. Yesterday, the pair managed to close above its 100-daily moving average, but overnight trading pushed the pair below the key level. A close below the 100-daily moving average today may be significant for further downward pressure for the Euro.