Top Story

Time is another Johnson enemy

The lack of it could stymie his bill and halt sterling’s advance

The concept of time is threatening Boris Johnson’s Brexit deal for a second time as MPs prepare for a Second Reading vote on whether they agree with its general principles. In turn, the pound has shown its first definitive hesitation in several sessions. The prime minister says he’ll scrap the bill entirely and go for a general election if  defeated tonight.

Johnson is fighting on two fronts. Voting begins on two motions from around 7PM BST: firstly, on the general principles of the PM’s withdrawal agreement, secondly on whether MPs agree to the fast-track timetable the government wants to adopt to spirit the legislation through Parliament before 31st October deadline. Soundings still suggest the deal could just scrape the required 320 votes. There’s less confidence that the timetable will be approved. Labour is instructing its MPs to vote against both motions. The 10 UK parliamentary MPs of Ireland’s DUP remain adamantly against Johnson’s deal too.

In context, Johnson’s election threat is not perceived as the biggest risk by markets. The PM has already lost two votes on having an election, failing to win the backing of two thirds of MPs as required. Labour has indicated that it would support an election only if no-deal was entirely off the cards. So the likeliest near-term outcome if the deal is voted down is more stalemate, more uncertainty.

As such, buyer’s remorse is beginning to show in the pound again. Some sort of retracement has been increasingly likely as sterling’s elevation from earlier-October lows extended almost to 8% in recent days. With measures of close-to-hand volatility expectations still at multi-year highs, in theory, if a clear reversal begins it could surge sharply.

First, sellers of sterling against the dollar must complete their push to see the rate below the first horizontal support since earlier this month. A successful break ought to be a clear signal that bears have regained control. Somewhat longer-term objectives are less important though an initial one may be support implied by hourly lows around $1.275 on 17th October.

GBP/USD – Two-hourly

Source: FOREX.com



Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

The markets are moving. Stop missing out.

OPEN AN ACCOUNT