Pound exchange rates rallied yesterday afternoon as new PM Boris Johnson lost his first vote in the Commons. His first vote as the new PM saw him lose to the Tory rebels and opposition MP’s who object to a no-deal Brexit. As a result GBP/EUR pushed from 1.0960 to reach 1.1050 this morning. We have also seen GBP/USD push from 1.1960 to 1.2150.
Why has the Pound rallied?
With the Commons voting 328 to 301 allowing them to bring a bill requesting a Brexit delay, this has eased concerns of the UK crashing out of the EU on the 31st October without a deal. This has lent some support back to pound exchange rates, although there is still plenty of uncertainty. MP’s will now vote on the Brexit bill, if it passes the vote on whether to hold an election will follow.
Will an election help the Pound?
In my view, no. One thing a market doesn’t like is political uncertainty and the prospect of a Jeremy Corbyn lead government could see the pound tumble.
Mr Johnson has tabled a motion in Parliament seeking approval for an “early general election” but has not specified a date. However Labour have said a bill to remove no-deal needs to be passed before they will support a call for a general election.
Today will see Boris Johnson’s first Prime Minister Questions at 12:00, followed by the Brexit bill debate at 15:00. The first vote on the bill is scheduled at 17:00 with the second round at 19:00. At 20:30 we could see a possible government motion on holding a general election, followed by a vote. As you can see today could see some further volatility and the current sterling rally could be short lived.
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