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Updated 03:10 15/11/19

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Pound climbs higher as PM concedes on Brexit extension


Liam Sheasby

Liam Sheasby, News Editor
21 Oct 2019, 12:15 p.m.

Boris Johnson Prime Minister UK

The Pound Sterling touched the $1.30 mark this morning as investor confidence in a Brexit deal passing in the near future grows, with the German investment bank Berenberg saying there is now a 75% chance of an orderly Brexit.

The Prime Minister announced on Thursday that a Withdrawal Agreement had been reached with the European Union, and that said deal would be presented to Parliament to try and pass Brexit before the October 31 deadline.

This news brought about a surge for the Pound, and with Sterling’s strength comes increased purchasing power. On Thursday the gold price dropped from £1,192 to £1,158 per ounce thanks to the stronger Pound, before falling further on Friday to £1,147 per ounce. The current price is today holding around the £1,148 mark, with investors moderately cautious about this week’s schedule in the House of Commons.

A rare Saturday sitting of MPs saw Prime Minister Boris Johnson defeated yet again (his eighth defeat in nine votes), by a margin of 322-306 in favour of the Letwin Amendment which blocks either of the no-deal or no extension scenarios.

Despite this setback, many believe the government now has the numbers to pass the Withdrawal Agreement at the second try; the reason being that those sceptical of backing a Eurosceptic PM may well be content to back Johnson’s deal now that the Hard Brexit / no-deal loophole is gone. Bloomberg have estimated the government to have a majority of just one, while the Financial Times are a little more optimistic with a majority of five.

The Guardian reports this morning that those companies (banks and housebuilders primarily) performing well on Friday after the Brexit deal was announced are still making gains, but The Telegraph reported a quote from Jordan Rochester – a Foreign Exchange Strategist at Nomura – who suggested “some profit taking” could hit the Pound if “further time wasting” occurs this week.

This likely refers to Labour’s plans. The first move is for an amendment that requires Britain to be involved in the same customs union as Northern Ireland. The second move is to whip support for another amendment. The proposal would attach a requirement for a second Brexit referendum if and when a deal or this deal is passed by the Commons. Support for such a move may be strong amongst opposition MPs, but it will be tough to convince the DUP and former Conservative members. Proposals are expected in the next day or two, but the second part is the more likely to succeed.

If the amendment were to pass then opposition MPs would almost certainly back Boris Johnson’s deal, which – if he and his MPs continued to support it – would approve the Withdrawal Agreement but not pass it; this decision would then fall to the public to decide on Remain or The Deal.

Speaker John Bercow will decide today if the government can proceed with a yes vs no vote in the Commons today, as Prime Minister Johnson wishes, or whether the proposal is too similar to Saturday’s failed vote. EU leaders including Leo Varadkar and Emmanuel Macron have warned that a Brexit extension is not guaranteed approval – even though the PM has submitted such a request.

It’s going to be an interesting week…

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