MP's Mull Election as Deadline Date Looms

Xe Corporate Europe

October 25, 2019 4 min read

Boris Johnson has pushed for a general election for 12thDecember in a complete turnaround from his previously ‘do-or-die’ stance of delivering Brexit on the 31st October. Mr Johnson contacted Jeremy Corbyn to let him have one last look at the withdrawal bill in order to try and get the deal ratified by November 6th. It is believed that Corbyn has, so far, not responded. The Prime Minister’s letter to MPs requesting the election reads “An election on 12th December will allow a new parliament and government to be in place by Christmas. If I win a majority in this election, we will then ratify the great new deal that I have negotiated, get Brexit done in January, and the country will move on.” It is rumoured that, if the election is declined by MPs, then he will continue to campaign for an election every day.

How could this play out for Johnson?

  • He submits his plan for a general election and requires a two-thirds majority among MPs to get it passed.

  • If MPs vote ‘Yes’, parliament then needs 25 working days to dissolve before a general election putting the date at 12th Dec.

  • If MPs vote ‘No’, then Johnson will need to resume his attempts to pass the Brexit deal as is.

Looking at the polls, it appears that the Conservatives have around a 10 point advantage over Labour currently, with Lib Dems not so far behind them.

In Mario Draghi’s final press conference, he left his Presidency of the European Central Bank with a very ominous remark: “The risks surrounding the euro area growth outlook remain on the downside. In particular, these risks pertain to the prolonged presence of uncertainties related to geopolitical factors, rising protectionism, and vulnerabilities in emerging markets.”

The incoming data since the last Governing Council meeting in early September confirm our previous assessment of a protracted weakness in the euro area growth dynamics, the persistence of prominent downside risk, and muted inflation pressures.”

It would appear that he forecasts some tough times ahead which weighed slightly on the EURUSD rates. It will be interesting to see how this plays out in terms of the interest rate controls and, more importantly, redefining the role of fiscal policy in how countries manage contributing inflationary and cash balancing factors.

The rate movement responding to key Brexit moves are entirely reflective of the uncertainty factor we saw as the key influencer in September and October. Hence, on the news that the Prime Minister will push for a general election – GBP lost ground against it principal trading partners. GBPUSD seems to be pivoting around 1.3000 in terms of investors deciding on value and a sustained run has yet to be seen. The mark for GBPEUR is more fluid, with less of a concerted trading pattern over the ‘big figure’ – being 1.1600. Normally, as markets dispute buy and sell value and it hinges on macro-economic data (such as with Brexit) we would expect a key break out in a particular direction. What we do know, is how the market values the GBP on the appearance of a Brexit deal: North of 1.3000 by some margin in the case of GBPUSD and North of 1.1600 in the case of EUR. Give the early stages of a Brexit agreement pushed the Pound to these levels, it can be reasonably expected that Brexit execution could provide even higher GBP cross rates

Key rates

GBPUSD 1.2837

GBPEUR 1.1552

EURUSD 1.1114

The figures are based on the live mid-market rate, correct as of 08:45 GMT on 25/10/2019, and are provided for indicative purposes only. Live mid-market rates are not available to consumers and are for informational purposes only. The rates we quote for money transfer can be selected via the page on our website ‘Live Money Transfer rates’.

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