Getting Brexit done
Today's news headlines:
- ‘World economy chiefs flirt with fiscal: IMF meeting takeaways’. Over the past week, annual meetings between the International Monetary Fund (IMF) and the World Bank took place in Washington. The discussion for fiscal stimulus to revive the synchronised slowdown across 90% of the global economy built momentum, yet there was no real agreement on how best to implement it. The IMF warned there is little room for policy error as many central banks have already exhausted capacity for stimulus. (Bloomberg)
- ‘Citi’s European chief signals confidence in London after Brexit’. Citibank, one of the most bullish banks on London’s post-Brexit status, says London would continue to benefit from its ‘unique time-zone and rule of law’, regardless of the Brexit outcome. Head of Citigroup in Europe, David Livingstone, dismissed the idea the UK would enter recession, insisting the devaluation in the Pound would make exports more competitive boosting foreign investment. (Financial Times)
Perhaps we can all agree that Saturday wasn’t particularly exciting in the end. After hours of debate in the House of Commons, MPs voted in favour of the Letwin amendment, forcing Boris Johnson to seek an extension to the Brexit deadline. The Prime Minister penned three separate letters to Brussels on Saturday night; the first asked for an extension of Article 50 as required by the Benn Act and was unsigned by Johnson; the second was a photocopy of five pages of the Benn legislation, requiring a delay until the end of January 2020; and the third was a signed letter stating that an extension would ‘damage the interests of the UK and our EU partners’. To avoid a no-deal, EU leaders are likely to offer the UK government a short extension to early-mid November, allowing Johnson more time to get his deal ratified, if passed. Otherwise, they’ll offer a longer extension to accommodate a general election or second referendum.
Today, Johnson will again attempt to win Parliament’s backing for his Brexit deal amid growing confidence that he has enough support to pass the motion. Foreign Secretary, Dominic Raab, told the BBC, ‘we appear to have the numbers to get it through’ and calculations by both the Financial Times and Bloomberg have the government winning by a close margin. One potential obstacle will be Commons speaker, John Bercow, who could decide not to allow the vote in today’s session. Nevertheless, the government would press on, introducing detailed legislation to deliver Johnson’s Brexit agreement before October 31st.
Bottom line: Whether it’s today or tomorrow, it’s looking more likely than ever that the British government will finally get Brexit done. We’ve seen this reaffirmed by Sterling, which refuses to surrender last week’s gains. Johnson may yet make good on his promise to deliver Brexit by October 31st.
Cable opened the London session around the 1.29 level, after some Sterling selling pressure in overnight trading following the delay to Saturday’s Brexit deal vote. Johnson’s new Brexit deal may be put to Parliament today, potentially creating volatile conditions for the Pound—resistance at 1.2990 could be tested again for the third time in three days.
The currency cross traded relatively flat in the second half of last week as both Sterling and the Euro gained against the US Dollar. With a light day of economic data for the UK and Eurozone, the ongoing Brexit saga is likely to determine today’s GBP/EUR movement. The pair could test last week’s support of 1.1500 or surge above Thursday’s resistance of 1.1661 to five-month highs.
Last week’s Dollar decline sent the common currency to two-month highs, climbing above both the 50 and 100-daily moving averages. A light day of economic data ahead could bring low volatility for the pair, but Brexit sentiment appears to have spilt over to the Euro in recent sessions so the trend could continue into today’s trading.