- Chances of No Deal Brexit rise
- Queen grants permission allowing proroguing of Parliament
- Sterling falls as risk increases
Another twist in the tale of Brexit and perhaps a defining day in British politics…
After being granted permission by the Queen, Boris Johnson will “prorogue” Parliament, shutting down the debating chamber on Sept. 12 so he can come back with a new legislative programme a month later – the longest proroguing period since WWII. This effectively gives parliamentarians two weeks to come up with a way to pass a law to stop Britain leaving the EU on Oct. 31 without a deal. Opposition leaders are outraged at the decision and will be forced to move quickly when parliament returns from summer recess next week.
The biggest concern in this latest chapter hangs over the Conservative party. There are now around 40 Tories who have indicated a willingness to rebel to prevent a no-deal Brexit, enough numbers to overturn Johnson’s current majority of one, if they decide to. However, rebelling against their own party could see an early election and risks putting Jeremy Corbyn in the top spot; a large number of MPs on the opposition benches, including some from his own party, aren’t buying the idea of making Corbyn prime minister, even briefly. The idea went down very badly with rebel Conservatives too.
The other big news from the day was from Ruth Davidson, the Scottish Conservative Party leader, who is due to make a speech later this morning where it is thought she will be stepping down from her position. She was credited with turning around Tory fortunes in Scotland in the 2017 election for Theresa May’s government which delivered 13 seats for the party. She was a leading advocate for staying in the EU and clashed with Johnson in a TV debate days before the 2016 vote; since Johnson has become PM, the relationship has failed to improve. The proroguing of Parliament seems to be the final nail in the coffin for Davidson.
In the markets, Sterling had a volatile day trading within a 1.5% range against the majors. Traders are bracing for the Pound to become more volatile after yesterday with the risk of a chaotic no-deal Brexit rising to 50% (Deutsche Bank). Yesterday, three-month Pound-Dollar volatility climbed to over 13%, the highest since Jan 7 – the highest amongst any group-of-10 peers and puts it in the same bracket as emerging-market currencies, such as the Mexican Peso.