Brexit politics come at you fast

Sterling is barely slipping for now

Sterling is barely slipping because things aren’t looking good for Johnson ahead of Parliament’s suspension

Brexit-politics tends to move swiftly, if not efficiently. Case in point: no sooner had we noted sterling’s resilience to Westminster drama (including confirmation that Parliament will be suspended for five weeks from tonight) than another set of near unprecedented events rapidly hit the wires. As such, a quick update makes sense.

  • The latest and biggest news is that The Speaker, John Bercow announced his resignation by the end of October at the latest. This isn’t entirely surprising. Bercow floated his retirement from the post of Speaker of the House months ago. But like many things in Brexit there’s a twist. The former Conservative MP has been a sympathetic supporter of politicians on both sides of the aisle who’ve been trying to thwart a no-deal Brexit. By predicating the potential date of his departure as soon as tonight, if The House votes in favour of Prime Minister Boris Johnson’s proposal for an election by mid-October, he’s applying pressure to lawmakers to ensure that doesn’t happen. To be sure, Johnson’s chances are slim anyway. The PM faces a house opposed to no-deal, and his Tory Party is now even more hamstrung having jettisoned 21 rebel MPs last week. Still, the outcome of Bercow’s conditionality ought to help bring about a sixth parliamentary defeat of Johnson in just a few days (a record for any new Prime Minister). Bercow said he will remain in post till 31st October if the government loses the early-election motion. He would thereby remain at the House’s disposal right up to Brexit current deadline. In all probability, he would also be willing to go against precedent—again—if necessary, to ensure most MPs’ determination to avoid no-deal wins out. After that, Brexit prospects may be quite different, depending on the nature of the next Speaker
  • As well as the election-date vote, The Speaker today also approved an application for an emergency debate on whether to force the government to release details on its 1. No-deal planning and 2. Any discussions it had ahead of the decision to suspend Parliament
  • The House agreed to force the government to release both sets of details.
  • These points could become slow burners for the government. Underlying the questions, tabled by former Conservative Attorney General Dominic Grieve, a pro-European, is the suspicion that 1. Planning may be flawed, at best 2. Discussions may have been perfunctory at best. Not only could the debate and any consequences be embarrassing, but it could possibly pave the way to further legal challenges against the government regarding its authority for such a long suspension.

Chart thoughts

Sterling reacted negatively to earlier events, but a wholesale reversal of its upswing to multi-week highs in recovery from its deepest rout in years looks off the cards right now. Trade against the euro may be particularly pithy this week given the strong likelihood of single currency turbulence when the ECB announces policy on Thursday, with a rate cut, at least, priced into rates markets at a probability of slightly more than 50%. The pound remains favoured in the short-term view charted below, affirmed by declining 20- and 50-interval moving averages and beyond. The EUR/GBP rate trades below the 50-interval average and was earlier clipped back under the 20-interval one too after a half-hearted look above it. Sure, sterling is beginning to lack wiggle rooms at highs (EUR/GBP lows). Its bounce back to near—but just short—of 25th July’s top was followed by a reversal. That move snapped the falling wedge that began forming last week. The breakout spoils some of the cadence of sterling’s advance. But the pound continues to draw a promising declining trend for EUR/GBP. In this case it’s ‘heads I win, tails you lose’ for the euro because a breach would quicken volatility in favour of sterling. At some point the pound is set to be confronted by its 6½-week high versus the euro at 89.047p which protects 25th September’s nearby 88.917p high. Their proximity corroborates solid sterling resistance in the region. At that point, the pound will either need to charge purposefully through to demonstrate its recent advance can significantly extend, or, the risk of an equally significant setback will grow.

EUR/GBP – Hourly

Source: Tradingview/City Index


This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit for the complete Risk Disclosure Statement.