Friday 18th October - 07:44 (BST)
GBP has moved over 5% in the past couple of weeks as markets grapple with the likelihood of the UK avoiding the unknown of a hard-Brexit and getting a deal over the line before the 31st October.
European Union leaders unanimously backed a Brexit deal with Britain yesterday evening, leaving Prime Minister Boris Johnson facing a battle to secure the UK parliament’s backing over the weekend. We have been here before and the sticking point remains the same. The Northern Irish party that Johnson needs to help ratify any agreement, the Democratic Unionist Party (DUP), has refused to support it, saying it is not in Northern Ireland’s interests.
On top of this, Johnson has no majority in the 650-seat parliament, and in practice needs at least 318 votes to get a deal ratified. The DUP have 10 votes. Parliament defeated a previous deal struck by Johnson’s predecessor, Theresa May, three times.
Deutsche Bank said in a note it thought there was a 55% chance parliament would reject Johnson’s deal, and other analysts made similar projections that the vote would not pass. Sterling has witnessed some of the biggest intraday moves since the financial crisis due to this uncertainty. Despite all of this, the UK prime minister said he was confident that parliament, which will sit for an extraordinary session on Saturday to vote on the Brexit agreement, would approve the deal.
The positive noises have seen GBP/USD rally towards the $1.30 level, the highest since May of this year. GBP/EUR has moved above €1.15 whilst EUR/USD also climbed to 1.11 - its best level since late August 2019.
