Posted on 12/17/2019 8:57:01 PM PST by Cronos
The Pound erased its post-election gains over the Euro and Dollar Tuesday amid reports that Prime Minister Boris Johnson will create a new 'no deal' Brexit cliff edge, which has led some analysts to suggest a further correction is in store for the British currency.
Prime Minister Boris Johnson reportedly plans to enshrine the end of 2020 into law as the end of the next phase in the Brexit negotiations and the 'transition' period the UK will enter once the withdrawal agreement is ratified and the country formally leaves the EU on January 31.
ITV News reported late Monday that Johnson will legislate via an amendment to the Withdrawal Agreement Bill as soon as Friday to "legally prohibit" any further delay to the UK's departure from the bloc. A vote is expected as soon as the bill returns to parliament, likely on Friday, after a ceremony led by the Queen.
Michael Gove, a Conservative Party MP who serves as Chancellor of the Duchy of Lancaster, claimed Tuesday the decision would not lead to a 'no deal' Brexit. He told BBC Radio 5 Live that "deadlines concentrate minds," while EU negotiator Michel Barnier was reported to have said the EU will do its "maximum" to meet the deadline.
"This plays to the Labour leave voters, who probably couldn’t stomach the idea of a two-year extension and paying into the EU budget without a say over policy. The move will clearly focus trade negotiators and it sounds like Downing Street is pushing for a Canada-style FTA on goods, with little care for services or regulatory alignment. The news probably cements the idea that 1.35 is a near term top for Cable and favours a correction to 1.3050/3150," says Chris Turner, head of FX strategy at ING.
Pound Sterling was quoted lower against all its major rivals in noon trading Tuesday as a result of the report, after having reached a post-referendum high against the Euro in the immediate aftermath of last week's election and a two year high relative to the Dollar.
"There was some speculation that Mr Johnson could soften his stance on Brexit given his 80-strong majority in Parliament after last week’s historic general election result. However, it seems a tougher attitude is being taken," says George Vessey, a currency strategist at Western Union. "This political development clearly highlights that Brexit is far from done and sterling is likely in for a bumpy ride if this hard-line rhetoric continues."
The Pound had rallied strongly against major rivals in recent weeks as markets saw the increasing prospect of a Conservative Party election victory not only seeing off the threat of an increasingly radical opposition party but also burying the threat of a 'no deal' Brexit for at least the foreseeable future.
Those gains are on the verge of melting away as markets respond to the renewed threat of an exit from the EU on World Trade Organization (WTO) terms but there are reasons for thinking that even if Johnson's amendment becomes law, the dreaded no deal exit will remain unlikely.
“Given PM Johnson’s majority and given this commitment to end transition at the end of 2020 was in the Tory election manifesto, this news is not a surprise but it highlights the likelihood of a barebones FTA deal that will fuel expectations of increased trade frictions in 2021,” says Fritz Louw, a currency analyst at MUFG.
A 'no deal' Brexit could still be unlikely because exiting the EU on WTO terms would leave Johnson open to the charge of having broken up the United Kingdom, or something similarly controversial on the political side.
This is because the ‘backstop’ would effectively condemn the Northern Irish province to a quasi form of sovereignty sharing with the EU unless and until unionist representatives in the province could persuade a sufficient number of their nationalist counterparts to vote to end the arrangements.
If and when the withdrawal agreement is ratified in the UK, Prime Minister Johnson will need to satisfy the EU that the open border on the island of Ireland will not compromise its single market when combined with divergence between UK and EU trade arrangements, customs processes and regulations. And if the PM is unable to that, Northern Ireland will be subjected to the 'backstop' in what would be a politically controversial development.
"GBP selling off today on a potential Dec 2020 hard Brexit. Personally I doubt a hard Brext & look for a deal in principle. Perhaps a phase 1 type deal as per US/china which will be agreed but not ratified or implemented & warranting an extension rather than a breakdown which in turn will keep a longer term bid tone to GBP in play," says Neil Jones, head of institutional FX sales at Mizuho Bank.
Analysts have said in recent weeks that Johnson's pledge to complete the trade negotiations without the need to extend the transition period beyond the end of 2020 will require the UK to make concessions to the EU during the negotiations. If the government agrees then a 'no deal' Brexit laced deadline that imposes a choice between an exit on WTO terms and a humiliating policy u-turn might seem in Westminster like it could shield Johnson and others from criticism of any extension to the transition period. In other words, it's possible the new 'no deal' cliff edge is a political gimmick that's intended mainly for consumption by the domestic audience, which would mean a WTO exit hasn't actually grown any more likely. However, analysts were already warning before the ITV report landed on the wires that Pound Sterling may have risen as high as it's likely to this side of the trade negotiations and that a correction is in store for the months ahead.
"The "Brexit irony" for the GBP is that signs of decisive leadership tend to weigh on the currency rather than support it," says Stephen Gallo, European head of FX strategy at BMO Capital Markets. "A large-scale UK/EU trade deal was never really going to be concluded within a calendar year anyway, but the fact that there will be no extension to the transition will raise the pressure on both sides to get a partial FTA inked quickly. If that's not possible, a rapid UK/US FTA might be even more vital for GBP."
Gallo forecasts the Pound-Dollar rate will trade around 1.30 in three months time and that it'll hit a nadir of 1.24 in six months, while the Pound-to-Euro rate is seen at 1.1820 in three months and 1.1481 in six months.
Its a divorce agreement.
These things are complicated and difficult. If you think a husband and wife deciding how to untangle their lives, split assets and move on is difficult, the situation between the UK and the EU is even more of a mess.
Getting married was easy. Cutting long-standing ties doesn’t literally happen overnight.
If it was that easy, it would have happened already.
they aren’t paying to leave the EU.
Johnson was clear at the time he would do no deal Brexit but then caved. Which was not the first time he caved. Boris actually voted for May’s deal. So I don’t know who he thinks he is fooling now.
13 September 2019 - Boris Johnson ‘won’t be deterred’ from Brexit on 31 October
... But despite the new law, Mr Johnson said he would rather be “dead in a ditch” than ask for an extension.
https://www.bbc.com/news/uk-politics-49690613
Bojo The Clown voted for May’s deal.
Get woke on that all you like.
you are correct on all threes counts - the withdrawal deal is agreed and done
the uk will leave as a member on 31 january 2020
the new trade agreement will be hard - but not impossible.
What does the brexit deal involve then, if not GB forced to hand over a bunch of money and rights?
“ UK will be on the EU teat February 1.”
It is Brussels that is sucking on the U.K. teat...as well as the other EU nations.
NO, that's NOT what is happening. Boris had his chance and schedule for Brexit, according to the UK Referendum, on October 31. It was Johnson who requested an extension from the EU to January 31, to hold his election. The EU granted it. As far as the EU is concerned, the UK is still a full member of the EU with all rights and obligations. The EU and the UK reached a provisional agreement in March 2018. It includes a transition period until 31 December 2020 in which ALL EU rules continue to apply. It also covers the border between Ireland and Northern Ireland.
Not rerally.
If that were true Bojo The Clown would have left the EU on October 31 to much fanfare.
But then I pointed out to you I am posting for real no deal BrexitLink?
But lewislynn, I don't care what a crazy racist idiot, who is too much of a cheap loser to donate a single dollar to FR in 21+ years, calls anti-abortion conservatives "lunatic disgusting dimwits" and sided with McCain on illegals because you are a Republican Party Thug who is UK centric and always hates on Germany and me,... thinks about anything.
Does the U.K. send money to the EU or the other way around?
Boris has been fighting to leave. Here’s a quote to give you an idea of how much it costs the U.K. to be in the EU:
The blog you linked doesn’t like my ad blocker.
Facts are that UK makes money (in tax revenues) from being in the EU because of having access to the single market.
Fact also is that the EU has absolutely no power to keep UK in the EU.
That leads to the fact Bojo The Clown could have simply run-out the clock on October 31 and left the EU by fait accompli but instead decided to remain connected to the EU.
What you are ridiculously posting is that Bojo The Clown, instead of leaving the EU decided to make a deal giving the EU many billions of Pounds because...?
... He just loves giving the EU billions.
You are obviously both ignorant to the issue and emotionally opposed to Boris. I’ll humor you for a short while.
From the article:
LONDON — Boris Johnson has defended the Leave campaign’s claim that Brexit will give Britain an extra £350 million a week to spend on the NHS by arguing the campaign could have used a larger figure.
The foreign secretary has told The Guardian that the figure splashed across the side of the Leave campaign’s battle bus in the run-up to the 2016 Brexit referendum should have been bigger than £350 million.
Johnson was pictured standing in front of the bus which had the slogan “we send the EU £350 million a week, let’s fund our NHS instead” emblazoned on the side.
In 2016 the UK Statistics Authority described the £350 million claim as “potentially misleading” as it didn’t take into account the rebate which is applied before Britain pays its contributions to the European Union.
FullFact described the claim as a “clear misuse of official statistics” in September 2017.
However, Johnson has doubled-down on the contentious claim.
“There was an error on the side of the bus. We grossly underestimated the sum over which we would be able to take back control,” Johnson, who played a lead role in the Brexit campaign, told The Guardian.
He claimed that the UK’s gross weekly contribution to the EU will rise to £438 million by the end of the proposed two-year transition period in 2021.
The government will be able to “take back control” of this money and spend it on the NHS, he added.
“As and when the cash becomes available – and it won’t until we leave – the NHS should be at the very top of the list.”
You are obviously both ignorant to the issue and emotionally opposed to Boris. I’ll humor you for a short while.I get it.
I already schooled you on the fact that it is Bojo The Clown who desperately wants access to the EU single market happen, with the EU having zero power to make that happen. He could have simply run-out the clock on October 31 and the UK would have been out with the EU unable to change that.
You can remain pig ignorant about that all you want.
Btw: How many children does Bojo The Clown have?
29 Nov 2019 - Boris Johnson refuses to say how many children he has
I never heard of any normal person refusing to simply state the number of children he has.
Are you an American citizen?
Or is a London pub creature wasting my time between dart throws?
Ok, you’ve gone from mildly amusing to a boring idiot in just a few posts.
Happy to be done with you. Spout your nonsense elsewhere.
You got triggered and then made a total ridiculous fool of yourself.
It is the UK crawling to suckle on the EU teat.
Crybaby who started the personal insults when I schooled you.
Still lmao on that!
Idiot.
Sorry, I don’t have the patience for fools anymore. From Berlin or not.
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