The first half of the week has seen yet more Brexit developments and delays within government and, with a December election planned, the rest of the year seems equally as tumultuous.
One element of uncertainty has been clarified - markets will no longer be ‘spooked’ by a Halloween EU exit on Thursday the 31st of October. The EU has given Johnson’s government until January 31st to leave the EU.
The government’s focus has been turned toward a general election – it is no secret that Johnson has been keen to get the ball rolling for a general election for quite some time, and Labour leader Jeremy Corbyn has also stated that he wanted an election too. However, with Labour abstaining from Monday’s vote on a 12th December election date, and finally agreeing to an election yesterday (29th October), this week has been no walk in the park for Prime Minister Johnson.
What does this mean for sterling in global markets? A significant development is that there will be no Brexit developments worth seriously considering until the outcomes of a December election are known. Therefore, for the near future, Brexit volatility will likely affect the pound less.
Historically, the pound has under-performed in the run up to an election and the prospect of a hard-left Labour government doesn’t inspire the markets toward optimism either. So, it is expected that there may be some more dips in store for sterling around the election period.
So whilst Brexit uncertainty fades for the short term, the pound will become more responsive to shifts in polling data and election news ahead of and after a Christmastime election.
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