Sterling is again making the headlines, surging to a 6-week high in trade-weighted terms, with Sterling up 2.5% versus a weakening Dollar in the past three trading sessions alone.
The PM has now suffered three successive parliamentary defeats which have likely reduced the odds of a “no-deal” Brexit. A bill, sponsored by the opposition Labour Party, which effectively stops the government taking the UK out of the EU without a deal, won a majority in the Commons yesterday and will now go to the House of Lords (upper house).
Moreover, Johnson lost a vote to hold an early general election. The Labour Party has left the door open to such an event after the government has formally sought from the EU a 3-month extension to Article 50 negotiations (assuming that by mid-October parliament has not approved the draft Withdrawal Agreement).
The British political situation remains incredibly fluid and uncertain. If the government will seek to push back the UK’s departure from the EU till 31st January 2020, whether the EU would grant yet another timer extension and and if a new UK general election could take place – are the questions which remain unanswered. Event risk remains acute and Sterling volatility is likely to remain elevated in coming weeks.
