Prime Minister Boris Johnson has requested a Queen’s speech to take place on the 14th of October in what is seen as an attempt to limit the opportunities of the Parliament to pass legislation that prevents a no-deal from happening.

Johnson has said MP’s will still have enough time to discuss Brexit, however, there may be little time left between the new opening of Parliament on the 14th and the Brexit deadline on the 31st of October.

This is why markets got a jolt of nerves when this news came out, as it is perceived this will give Johnson more of a free hand to secure a no-deal Brexit, hence why sterling sold off.

What may have even increased more than the chance of a no-deal Brexit is the chance of a general election, as this can be the last push for MPs that oppose a no-deal Brexit scenario to support Labour’s attempts to hold a vote of no-confidence in the current government.

In this light, it can even be seen as a pre-emptive strike by Johnson for a general election, as this move positions the Conservatives even stronger as the party that just wants to “get on with it” and “deliver Brexit”.

If Johnson indeed sees a GE as unavoidable and estimates he can win a Conservative majority on the back of a “politicians vs. the public” agenda, he may have just pulled a genius move by having the Labour party work for him.

Additionally, this move runs down the clock on the available time for renegotiations with the EU, which can be a negotiation tactic by Johnson to push Brussels to make further concessions.

Sterling’s sensitivity to political headlines may only stand to increase as the prospect of a general election may force all parties to be more clear about their Brexit stances.

Just like with the original EU-referendum, we may be up for another fixed-date event with a more clear binary option.



Author: Bart Hordijk, FX Market Analyst at Monex Europe.