Not-So-Super Saturday and Sterling's Reaction
Updated: Oct 22, 2019
Sterling remains tied to the drama of parliament following this weekends, somewhat anti-climactic, events. News outlets and political experts were predicting a ‘Super-Saturday’, as parliament sat on a weekend for the first time in 37 years.
There was an expectation that MPs would vote on Boris Johnson’s new deal. However, MPs were able to table amendments since Thursday night after the PM released the 500-page document outlining the new deal.
It was one of these amendments which caused Johnson’s government the greatest snag, effectively halting Saturday’s proceedings and throwing out the chance for MPs to agree on Johnson’s new deal.
A conservative MP, Oliver Letwin, tabled the motion that the "meaningful vote" needed to approve Mr Johnson's Brexit deal can only happen once the legislation required to leave the EU - the Withdrawal Agreement Bill - has passed through parliament. The PM was left with no option but to ask the EU for a further extension to Brexit, and it remains up in the air if he will do this or try and skirt the law to ensure his government achieves a 31st October Brexit date.
So, what does all this mean for sterling activity?
A no-deal Brexit is now off the table, at least for the short-term. For sterling these events are good news, and as such it would now appear that it could stay supported for a time. However, reports on the new withdrawal agreement and what type of trade deal PM Johnson wants to agree with the EU post-Brexit suggest that any UK-EU trade agreement will not be a Canada plus deal. It will rather be a Canada minus deal, and as such this will be harder for the UK economy to cope with.
Ominously, cycles analysis considers that the next short-term cycle peak is expected between October 28th and November 3rd. It suggests that the latest probabilities are 10% for a no-deal Brexit, 60% for an extension to article 50 and 30% for a deal.
Sterling slipped slightly in reaction to Saturday’s proceedings, as traders can expect more uncertainty over the coming week. Although the market remains nervous, the reduction of no-deal is generally welcomed as this put Britain in a stronger economic position than the alternative.
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