Just Another Day in the Office for the PM?

Xe Corporate UK

September 25, 2019 4 min read

Boris seems to have attracted a great deal of trouble of late. He is flying home early from his attendance in the States at the UN general assembly to manage the breaking situation that unfolded yesterday – namely that his advice to the Queen to suspend parliament was unlawful and void.

He will have had a call yesterday to speak to the Queen to protect his position and possibly apologise. In addition, he will have 14 days to explain his links to a US businesswoman amidst claims he did not adequately declare a conflict of interest – while this may not be directly news related to FX, if this adds mounting pressure on him to resign it certainly could have a hand in shaping the relative strength or weakness of Sterling.

We learned yesterday the ruling of the Supreme Court was, unanimous, in their decision they a) were able to intervene in the matter of whether or not the prorogation of parliament and b) whether or not it was unlawful and in both cases the verdict was ‘Yes’.

This meant that Parliament returned to work immediately, and the GBP saw a significant spike on news that this could perhaps mean that we had enough time to work out a Brexit deal with the allotted remaining time. However, this spike in GBP strength was short lived and the gains from this news are now largely eroded – the Pound trading at almost exactly where we were before the release.

Political manoeuvring began in earnest, Jeremy Corbyn (and a great many others) calling for both Boris Johnson’s resignation and a general election. But the fallout was not limited to the Prime Minister. Senior aides and those who advised the PM (including the Attorney General) came under fire for providing advice that was not lawful at all.

The ‘party line’ appears to be that all disagree with the ruling of the Supreme Court but that they will respect the decision and, of course, abide by its course. There appears some interest from Boris that he will go ahead with a Queen’s speech but this would require a further prorogation.

Where does this leave us in terms of delivering Brexit within the timeframe allotted? Well, not a lot closer actually. The Finnish Prime Minister (who currently holds the EU’s rotating presidency) said that he and Emmanuel Macron both believe that if cogent proposals are not produced within the next 12 days ‘then it is over’. Downing street comments ‘We will continue negotiating and put forward proposals at the appropriate time’.

The UK has received scrutiny for not putting any plans in writing and also not discussing any plans publicly, but Johnson has maintained that he has presented a great number of different solutions to the Irish border issue among others and simply does not want to negotiate in public. This looks like things will come down to the wire now – uncertainty which will weigh on the Pound, surely.

In price movement yesterday, the range was of interest:

GBPUSD – 1.2419 early in the morning and then a spike up to 1.2496 during the day after the news referenced above. Then back down to 1.2441 at the time of writing. It seems likely that further losses could be expected during the day, attributable to the timeframe remaining and the political unrest that is now amplified

GBPEUR – An almost identical story here 1.1299 early in the day, spiking up to 1.1354 after the Supreme Court decision and now 1.1314.

EURUSD – The EUR is slowly replacing some of the stark losses of the 23rd, though not by much. Trading at 1.09983 at the time of writing.

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