It was a quiet day in terms of economic data yesterday, resulting in the market focusing on political rhetoric. In the House of Commons, Prime Minister Johnson made a fresh general election bid. Parliament rejected PM Boris Johnson's bid to call a snap general election - for a third time - despite the prime minister arguing it would help "get Brexit done". A legal requirement for a snap election is the support of two-thirds of MPs - at least 434. Labour abstained in Monday's ballot, meaning that despite 299 MPs voting in favour and only 70 voting against. This was telegraphed well in advance and as a result Sterling was largely unmoved.
At the beginning of the day, Sterling received some support as the EU granted the UK a further extension of Article 50. The delay was requested by Boris Johnson after MPs passed a law forcing him to avert a no deal at the end of October. European Council president Donald Tusk described the delay as a “flextension”, saying in a statement on Monday morning: “The EU27 has agreed that it will accept the UK’s request for a Brexit flextension until 31 January 2020. The decision is expected to be formalised through a written procedure.” Under the terms of the EU treaties, the UK could leave before February if MPs approve the withdrawal agreement before the deadline is up. In that case, Brexit would take place on the first day of a month after the withdrawal agreement is approved.
Looking to the day ahead, the market will be looking out for Brexit developments. Media reports suggest that the government will try for a fourth time today, but implement an amendment to the Fixed Term Parliaments Act with a “first past the post” bill, meaning they it would require a simple majority of 1; rather than two thirds.
Fed interest rate decision tomorrow
For the US Dollar, the US Fed policy decision is tomorrow. The US Federal Reserve (Fed) is widely expected to cut interest rates for the third time this year. In terms of economic data from the US, we have pending home sales and the Conference Board’s measure of consumer confidence; however, this is unlikely to change tomorrow’s rate decision.
Brexit uncertainty continues to drive the erratic price action. If you have any questions, require a live execution price or some added information regarding a hedging strategy to potentially reduce currency volatility, please contact us via email or directly on 0203 384 7280.