Boris Johnson has endured a disastrous week, after rebel Remainer MPs first voted on Tuesday in favour of bringing forward a Bill designed to block a no deal Brexit next month. Mr Johnson attempted to counter this by immediately tabling a motion for an early general election to be held on October 15. But he was defeated again last night when hundreds abstained from the vote – leaving him 136 votes short of the two-thirds, 434 votes required to trigger an early poll of the British people.
High political uncertainty still remains, but the pound has responded strongly to the sense a no deal Brexit has been avoided – at least for now.
Pound Sterling had gained more than half-a-percent on the euro to stand at €1.1161 at 4pm, having reached a high of €1.1169 at 11.25am.
The British currency had surged by as much as 0.8 percent against the US dollar to $1.2349 at 12.25pm whilst building on Wednesday’s 1.4 percent surge – its biggest one-day jump since March.
This is also more than three cents higher than Tuesday morning before Mr Johnson lost his majority and rebel MPs seized control of business in the House of Commons.
Boris Johnson has suffered a blow with his no deal Brexit plans, but the pound has reacted
The pound has surged against the US dollar to a five-week high
This all means the pound is on track for its biggest two-day rise in 10 months as investor fears over Britain leaving the European Union on October 31 without a deal begin to ease slightly.
David Cheetham, chief market analyst at XTB UK, tweeted: “The pound has enjoyed a strong bounce in the past couple of days as parliament has wrestled control of the Brexit process and looks set to pass legislation that would prevent a no-deal.
“Still lots of political positioning going on and no doubt many twists and turns to come but the simple fact is that the chances of a no-deal Brexit have receded of late and this has provided some support to sterling.”
Neil Jones, head of hedge-fund currency sales at Mizuho Bank, said: “A delay for both Brexit and general election will continue to send the pound higher.”
The pound has plummeted against the euro over recent months
At the start of the week, poundsterlinglive.com technical analyst Joaquin Montfort forecasted in the short term, the pound would continue to make gains against the euro.
The financial forecast website predicted a delay to Brexit could see the pound rise to €1.15, and as high as €1.25 in the event of a deal being agreed with the European Union.
UBS offered even more optimism, and predicted if Brexit is in fact delayed until the end of January and a general election takes place after October 31, the found could rocket to a four-month high against the US dollar and blast through the $1.30 milestone.
Foreign exchange strategist Daniel Daniel Trum told poundsterlinglive.com: “If, as we expect, Brexit is delayed until January 2020 and an election is held after October, we would expect this recovery to continue.
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“GBP/USD could rally above €1.30. A deal could even bring it to €1.35.”
Berenberg Bank economist Kallum Pickering told poundsterlinglive.com the odds of a no deal Brexit now happening have been reduced by recent developments to around 40 percent.
But economists have continued to warn any enthusiasm for the pound could soon be destroyed and economic growth could be hit if the chances of a no deal Brexit rise again.
Peter Rosenstreich, an analyst with Swissquote Bank, told poundsterlinglive.com: “Forecasting Brexit has gone from hard, to impossible.
“The fluid, politically charged situation means scenarios changes with the news cycle.
Economic loss per EU member state in the case of a no deal Brexit
“Times like this we would just like some popcorn to watch the action from the sidelines. It looks like the UK is heading for another useless extension.
“One thing is for sure, for the UK’s economic outlook, extra uncertainty will further damage economic growth and investor appetite.”
Joshua Mahony, senior market analyst at IG, warned: “The anti-‘no deal’ coalition are clearly emboldened by their growing strength, with Johnson’s calls for a general election expected to be rebuffed until anti ‘no deal’ legislation is passed.
Ultimately, the circumstances leave plenty of room for a disorderly exit, with the prospect of a Corbyn-led period of extensions and uncertainty not the most exciting prospect.
“There is no doubt that any General Election would be difficult to call, and thus while a lifeline has been provided for the pound, Boris Johnson still remains the favourite, with a no-deal now seemingly the default outcome.”