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Brexit update – The never ending story continues

Steen Jakobsen, Chief Economist & CIO, Saxo Bank, comments on the latest Brexit developments.

After initial sell-off into the Asian open, GBP USD has slowly been moving higher Downing streets claims to have the votes to pass the Withdrawal agreement if given straight vote today Unlikely we will have resolution in next 24 hours on this vote

Author: Steen Jakobsen, Chief Economist & CIO, Saxo Bank. Written Monday, 21/10/2019

Another week, another Brexit vote. PM Johnson keeps trying and pushing for a Brexit by October 31st. Meanwhile Labour is trying to force a 2nd vote and to stall process to force extension to minimum January 31st. Saxo Bank sees 75% chance of Brexit before January 31st

Someone has to do it – here’s the Brexit update

Today – Monday – will see big maneuvering by both sides to set the agenda in the Commons. The Speaker John Bercow will rule on whether Government can bring forward a “meaningful vote” on its withdrawal agreement (source: Evening Standard). The potential outcomes excellently diagrammed by The Guardian below.

Furthermore, judges are sitting and deciding if the unsigned letter asking for extension is in violation of the Benn act. “The Prime minister sent a total of three letters: An unsigned photocopy of the request he was obliged to send under the Benn act, an explanatory letter from the the UK ambassador to the EU and a personal letter explaining why Downing Street did not want an extension” – (Source: The Guardian)

Read: Risks and silver linings amid the global economic malaise

The short-version including links:

Rule on meaningful vote by the Speaker John Bercow

Depending on ruling – Pass – no extension needed – or Fail – either by procedure (Letwin amendment) or by vote. Then there will be a vote on Tuesday to amend or withdraw the Withdrawal bill.

Rule of extension letter in violation of Benn act by judges (minor issue relatively…)

Labour will let PM’s deal through if its subject to a confirmatory referendum

Labour is trying to forge alliance with DUP and Tory rebels, but DUP will not go for second referendum according to their spokesperson

After initial sell-off into the Asian open, GBP USD has slowly been moving higher – 1.2930 in time of writing – 1.2980 old high. Downing streets claims to have the votes to pass the Withdrawal agreement if given straight vote Monday. Labour is confident Speaker Bercow will stop this vote setting up Tuesday for 2nd reading of Withdrawal bill.

Unlikely we will have resolution in next 24 hours on this vote. This most likely remains a long week including next weekend being used to prepare October 31st exit from EU.

Read: GBPUSD headed for 1.30 after UK, EU reach Brexit deal

Probabilities according to Saxo:

Pass of Withdrawal deal including amendments by October 31st: 50%

Extension to January 31st, or longer: 25%

General Election including extension beyond January 31st: 25%

The momentum right now is to get deal done, but it’s a very fluid situation which we will keep updating.

Read: What’s next for Brexit?