The UK Parliament spent its first of five weeks in suspension, but it was far from quiet on the political front.
On Monday, a 2nd motion for a general election failed, leaving Johnson with a battle on his hands to deliver a 31st October Brexit.
Behind the scenes, the British government has been busy meeting with individual member states to draw out bilateral agreements.
The failings at Brussels has left Britain no choice but to go direct. Interestingly, there have been reports of agreements being put in place in the event of a no-deal departure.
This suggests that, it’s not only Parliament that is divided on Brexit, but also the EU.
Not too dissimilar to the EU Referendum build-up, however, there appears to be plenty of contradictory messages.
While the British PM announced optimism over having a deal in place, the EU’s chief Brexit negotiator had quite a different view. Barnier said that he had little reason for optimism.
Key to any bilateral agreements will be Germany and France and without either, Johnson would likely need to break the law to deliver Brexit.
With the Irish backstop the stumbling block for a deal to pass through Parliament, news of the DUP changing its stance on the backstop was positive. Though once more, there was some dispute over the report. On this occasion, DUP leader Foster denied any such change in position.
On the political front, the Court of Session overturned its ruling on the lawfulness of suspending Parliament. While Johnson’s team is appealing against the decision, key in the week ahead will be the Supreme Court ruling in London on Tuesday.
MPs could return to Parliament before the end of the week, which would deliver another blow to a determined PM.
A tumultuous week for the British Prime Minister delivered a boost for the Pound, which rallied by 1.77% to end the week at $1.2501. It was the Pound’s highest close since 19th July…
What Lies Ahead?
The British Prime Minister is due to meet both Juncker and Barnier on Monday. We can expect plenty of Pound sensitivity to updates from the meeting and expect comments from the EU’s side to have greater influence.
Market focus will then shift to Tuesday’s Supreme Court ruling on the lawfulness of suspending Parliament.
Another ruling against Johnson would likely lead to an early end to the suspension.
Whatever happens in the coming week, the British Prime Minister appears to have ruffled one too many feathers.
It may be a tall order for Johnson to get support for any deal from Parliament and for the Pound that can only be a good thing.
The negative, however, remains the uncertainty that has held Britain captive. A Brexit extension to next January would almost certainly result in a 2nd referendum.
Will the outcome be different? There’s been plenty of noise from the Pro-Remainers, but are there enough to reverse the 2016 result?
It’s certainly an unknown and more significantly, a 2nd Referendum would remove the control of Brexit from MPs.
For the Pound, the British PM will need to continue to make progress on Brexit. Progress would divert attention away from the possibility of a disorderly Brexit next month.
It may boil down to British negotiators accepting the EU’s backstop proposals. This would remove the need for a customs union with the EU. It was the prospect of such a union that had led to the untimely demise of Theresa May…
With time running out, it’s set up to be a big Brexit week ahead.
This article was originally posted on FX Empire
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