It’s been an intense week for the UK’s Brexit negotiations. While on the one hand a ‘No Deal’ now looks likelier, on the other hand UK Prime Minister (PM) Boris Johnson simultaneously looks closer to reaching an agreement with the EU. As such, sterling has frequently fluctuated in value.
To start with, Mr. Johnson has received permission from the Queen to suspend Parliament, between September 9th-12th up to October 14th. Mr. Johnson alleges that he’ll shut down Parliament during this five-week period, to prepare his government’s new legislative agenda.
The PM says that: “We need new legislation, we’ve got to bring forward new and important bills, and that’s why we need a Queen’s Speech.”
However, opposition MPs argue that the PM will close the House of Commons to reduce the time available for opposition parties to legislate against a ‘No Deal’ Brexit. Parliament will now be in session for just a couple of weeks up to the UK’s extended Brexit deadline of October 31st.
This gives MPs a limited window to oblige the government to request an extension to Article 50. Following Mr. Johnson’s announcement, both Labour leader Jeremy Corbyn and Liberal Democrats leader Jo Swinson have requested an audience with the Queen.
However, while the PM’s manoeuvre to close Parliament seemingly raises the odds of a ‘No Deal’ Brexit, Mr. Johnson is simultaneously making progress toward reaching an agreement with the EU.
At Mr. Johnson’s recent meetings with German Chancellor Angela Merkel and French President Emmanuel Macron, plus at the G7 Summit in Biarritz last weekend, the UK premier convinced the EU to show flexibility toward the draft Brexit deal for the first time.
The financial markets appear to be increasingly hopeful that the UK and EU may reach an agreement, ahead of the Halloween deadline. This could influence the pound, looking ahead.
Meanwhile, looking to the UK economy, it’s been a quiet week for data releases. On Tuesday 27th August, we learnt that UK Mortgage Approvals rose by 43,342 in July, according to BBA (trade association for banking in the UK), above the forecasted number of 42,800 approvals. This suggests that the British housing market remains resilient to the Brexit uncertainty.
Next week is set to be much busier for UK economic releases, with greater potential to move markets and the pound. We’ll learn the UK’s Manufacturing, Construction and Services Purchasing Managers’ Index (PMI) performance for July.
This will tell us if UK economic activity remains close to stagnation, and may affect the value of sterling, as well as the ongoing Brexit negotiations both inside Westminster and with the EU.
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