December 13, 2019 — 4 min read
The Nation has spoken, and it’s a unanimous vote to “get Brexit done”. There are a number of typically Labour represented constituencies that lost their seat to the Tories, some have never had anything but a Labour representative and so shows the vehemence of the will of the UK to end the Brexit ‘hokey cokey’. Corbyn will stand down as leader of the Labour party and LibDem leader, Jo Swinson will also abdicate her title after an embarrassing loss of her home constituency. Overall, the net benefactors were the smaller parties, picking up the biggest gains but the biggest loser of the night was very easily Labour – with around an 8% loss of votes versus last election (The Conservatives gained around 1%).
Boris Johnson, the fully elected UK Prime Minister, has this morning spoken to the nation. Brexit will be done before the end of 2020. No ifs and no buts. There will be no second referendum. But how long will the transition phase last? Will there be a request for extension at all in the months to come? And how will the process of negotiating trade deals get under way from here? President Trump has already tweeted that the UK are free to negotiate a new trade deal with the US.
Questions remain for UK businesses, where Financial and long-term investment plans are concerned; how will any benefits (if there are any) manifest and how long until we see these flow through the economy. Essentially up until December 2020 we may be out of the EU, but with a net effect of still being part of the Single Market. There appears to be significant investment monies that have been mothballed, if the reports are to be believed, being on the back burner due to Brexit-related uncertainty. It will be interesting to see business confidence measure and net investment inflows during the coming months. PM Johnson’s new mandate will likely be predicated on avoiding overspending, and ensuring planning and this could take time.
Actions speak louder than words. For both sides of the coin import or export, it is decision time. There is the expectation that we could see GBP back to pre-referendum levels over the next 12 months. But there is a lot of water to go under the bridge before then. In the meantime, it’s all about the levels. GBPUSD made it above 1.35. GBPEUR above 1.20. but where to from here? It may be a more muted day today in terms of volatility but by no means is this guaranteed for the coming business period before the festive season.
What is clear, though, is that business will be buying goods from overseas at a discount of around 13% from September levels. One wonders how long it would take to add that kind of profit margin through other means…
Rates at the time of writing:
GBPUSD - 1.3388
GBPEUR - 1.1984
EURUSD - 1.1170
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