Pound jumps on optimistic Juncker comments

The Pound has rallied overnight following comments from European Commission president Juncker which have increased optimism of a Brexit deal being made before the end of October. 

In an interview with Sky news, he said “we can have a deal” on Brexit. He also said he was doing “everything to get a deal” and that he is prepared to get rid of the so-called backstop from a withdrawal agreement “if the objectives are met – all of them”. 

Although these comments aren’t anything new, and they’ve been trying to find alternatives to the Irish backstop for a long time, the market has taken this cautiously optimistic tone positively and traders have bought into the Pound. Boris Johnson has sent some confidential proposals for alternatives to the backstop and there seems a new willingness by the EU to explore these ideas and accelerate Brexit negotiations. 

Irish foreign minister, Mr Coveney, has said however that “there’s still a big gap between what the British government has been suggesting that they’re looking for and what Ireland and the EU need in terms of getting a deal”. Therefore, it will all depend on how well Boris’s new proposals protect the EUs red lines. Traders eyes will focus on the upcoming negotiations between Mr Barnier and Steve Barclay. 

Yesterday, we had the last day of the legal battle in the Supreme Court over the Government proroguing of Parliament. We should get their final decision on this early next week, so this is another thing to bear in mind.

As a result, the Pound has pushed up over 1% against the Euro and now trades close to a 4-month high. The GBP/USD has also rallied a 1% higher and trades around the best levels in 2-months.

Pound soars as opposition lawmakers seize control of Parliament today

The Pound has soared today as fears surrounding a no-deal Brexit have receded following events in Parliament overnight.

Last night, lawmakers opposed to Boris’s Brexit plan won the vote (328 vs 301) to seize control of today’s business in Parliament, which gives them a chance to pass a bill today to extend Article 50 by three months (to 31st Jan 2020).

Even after Boris threatened to deselect any Tory rebels, a total of 21 Tories still voted against him in last night’s vote. The bill will be introduced this afternoon and voted on this evening. It’s now given a good chance of passing but the question will be whether they will have enough time to turn the bill into law before the government shutdown.

If the bill passes later, Boris has tabled a motion calling on an election (likely for the 15th Oct). He would need two-thirds of Parliament to agree to this snap election though. It seems Parliament will not go along with this until they’ve taken the immediate threat of a no-deal off the table, which would be another setback for Boris. This has given another boost for those wishing for a no-deal Brexit to be avoided.

So, today the Pound is finding some salvation but the situation is still very fluid and there many complications ahead. No-deal Brexit risks are still on the table and things can change very quickly.

In other news, news that the Hong Kong leader will fully withdraw the contentious extradition bill points towards there being some resolution on the public unrest there. Markets have generally been more upbeat and risk appetite has increased since the news came in. This has boosted risk currencies such as the AUD/NZD and weakened safe haven currencies such as the Yen and CHF.

As a result, the GBP/USD bounced off its 3-year lows and is up over 2-cents from yesterdays low. The GBP/EUR have pushed up by over 1% and trade close to the best levels since the end of July.

Pound drops as political uncertainty weighs

Sterling has lost ground today as political uncertainty ramps up with Johnson suspending parliament and increading odds of a snap general election.  

Last week, Boris Johnson announced plans to suspend Parliament for over 4-weeks from early September which was later authorised by the Queen. This has been met with fury by many MPs who are only returning back from summer recess tomorrow. Whilst Boris refutes that he was trying to prevent parliament from blocking his Brexit plans, this suspension means that MPs will have an extremely limited time to pass any new legislation to prevent a disorderly exit from the EU on the 31st October. Therefore, although some would argue that this is the best way of achieving a deal with the EU before the 31st Oct deadline, this has increased the risks of a no-deal Brexit and continues to keep the pound under pressure.

Parliament will still try to act as quickly as it can this week to try and prevent a no-deal exit. There are two options to do this… one through new legislation or secondly through a vote of no-confidence in the government. Passing new legislation will likely be the first route but this will be very challenging with the time available. Current reports indicate that the main attempt will be to pass a law to extend Article 50 by another three months in a bid to allow more time to get a deal sorted.

If new legislation fails, then numerous Tory MPs have said that they would be prepared to vote against their own party to bring down the current government to help avoid a no-deal. Boris has increased pressure on these Tory rebels by saying that they will be kicked out of the party if they vote against him. With a working majority of only one MP, Boris would need the help of rebel Labour Brexiteers to help maintain his current strategy. If Boris’s plans are scuppered this week, then it is likely that he will call a snap election to be held before the October deadline. These rumours have been growing all day which is creating further political uncertainty and reducing the amount of time available before the Oct 31st deadline.

As it stands, the UK political uncertainty is possibly the highest it has been since the whole Brexit saga began and traders are bracing for more big swings in the Pound over the coming weeks (volatility levels hit their highest levels for year). As a result, the GBP/USD dropped nearly 2-cents from Friday’s high and the GBP/EUR lost around 1-cent from Friday. Watch this space as this week could be an interesting one.

Pound jumps on Merkel positivity over finding backstop solution

The pound has just bounced higher following some more positive comments from Germany’s Merkel this afternoon. She suggested that solutions for Brexit and the Irish backstop could be found by the 31st October deadline.

This follows on from an upbeat meeting between her and Boris Johnson yesterday afternoon where she tasked Boris to find an alternative solution to the backstop within the next 30-days. These more conciliatory tones from Europe’s biggest economy have so far been taken well by the market. As a result, the Pound’s just spiked up over 1-cent against both the Euro and USD; with the pound trading at a 3-week high.

Earlier comments from France’s president (Mr Macron) were firmer ahead of his meeting with Boris today. He re-iterated the importance of keeping the Irish backstop and the importance of protecting the European project. It will be interesting to see if we get any further developments following their meeting and after this weekend’s G7 Summit.

Pound set for a good week, particularly against the Euro

Sterling has clawed some ground back this week and looks set for its biggest weekly gain in a couple of months.

This follows on from some resilient UK economic data releases this week, including better-than-expected earnings, retail sales, and inflation figures. Previous UK data has disappointed which increased the market perspective that the Bank of England would look to loosen monetary policy soon to stimulate the economy (Pound negative). This week’s data suggests that things might not be as gloomy as previously thought.

Brexit will continue to be the biggest driver for Sterling though. We’ve seen momentum start to grow this week from MPs trying to prevent Boris Johnson from taking the UK out of the EU without a deal, which has lent some further support to the Pound. The outlook over Brexit remains unclear and lots of uncertainty lies ahead as the Brexit departure data closes in. Traders are seemingly using this week’s more upbeat mood in the Pound as a good time to cash-in on some short Sterling positions.

In other news, the Euro has come under renewed selling pressure this week as expectations increase for an announcement of an extra-large stimulus package from the ECB at next month’s meeting (so more QE etc). Coupled with some solid US data this week, traders have been shifting funds out of the Euro and into the Greenback.

As a result, this has pushed the EUR/USD down over 1% this week and to the lowest levels of the month. This has also helped Sterling gain nearly 2% against the Euro this week, pushing the GBP/EUR to a fresh 2-week high this morning. The GBP/USD is off its lows but relatively subdued due to the ongoing Dollar demand.

Pound slips as UK economic growth slides

Sterling has just dipped after official data showed that Britain’s economy shrank in the second quarter of this year.

The growth data (GDP) came in worse than expected at -0.2% versus forecasts for a flat reading. This data increases fears that the UK could be heading towards a technical recession, which is defined as two consecutive quarters of economic decline. The impact and uncertainty over Brexit has contributed a lot to this but there’s also a global slowdown in growth which is mainly attributed to the ongoing trade war between China and the US.

Since Boris Johnson’s election, the Pound has slid as fears of a no-deal Brexit increased causing traders to re-calibrate their positioning. It’s descent has been limited in the past week, however, as traders pause for breath and technical support levels provide some reprieve for the battered Pound. Furthermore, the UK government remain in summer recess until the start of September, so the market awaits any fresh Brexit developments. 

It’s likely that Boris Johnson’s government will face a vote of no confidence when the House returns on the 3rd September. With a majority of only one MP, and many Tory MPs still angry at Johnson’s Brexit approach, there is some chance of him losing this. There are concerns, however, that even if Mr Johnson were to lose this vote of confidence, that he may still be able to force a no-deal through before any general election is held (as this is the default legal position). Watch this space as lawmakers continue to look for ways to block a disorderly Brexit.

As a result, the GBP/USD is back towards the bottom of its range and testing near-term support (around lowest levels since Jan 2017). The GBP/EUR has pushed close to a 2-year low having lost around half a cent this morning.  Pound crosses have not moved that much over the past week and might continue to be relatively subdued in the short term. However, as we get closer to September there’s likely to be a renewed focus on Brexit as we get closer to crunch time (again!)