We are finally at the point where the new Prime Minister will be announced on Tuesday. It seems very likely that it will be Boris Johnson (hard-core Brexiteer) which is not favored by the markets. I expect this pair to go up slightly in the beginning of the week as a reaction to Boris Johnson being the PM. Then hopes will flare up that he can delay Brexit beyond 31 October and reach a deal within a year after this...or will he insist that the UK leaves on 31 October, deal or no deal which could lead to a general election or will Boris Johnson suspend Parliament in an effort to block MPs from stopping him on 31 October....
ING developed markets economist James Smith has assigned a 35% probability that parliament passes a no confidence motion in the next leader, triggering a general election in late 2019 and thus delaying Article 50 for at least three months. Smith projected that prolonged uncertainty would send EUR/GBP to 0.95 and GBP/USD to 1.18. Stephen Gallo, European head of FX strategy at BMO, has assigned a 53% probability that Brexit happens on October 31, either through a no deal Brexit or a form of “managed no deal.” In this scenario, he predicted that the pound will fall to 1.2100 against the dollar, while the euro would gain ground on sterling, climbing to 0.9008.
Trading any pair where the GBP is involved is risky in the months ahead. You might make money, or it could turn against you. I personally favor the GBP losing ground against other currencies as we lead up to 31 October.
Here are some statistics as they stand today from oddschecker.com: 8% chance of a 2nd EU referendum 29% chance UK leaves EU in 2019 without a deal 26% chance UK to leave EU without a deal 26% chance UK leaves EU before December 2019 27% chance UK leaves EU in 2022 73% chance a deal is reached in 2019, Article 50 extended beyond 2019 or Article 50 revoked 9% chance Article 50 revoked 40% chance UK to extend Article 50 beyond 31 October 2019
I like your analysis. I disagree on the fact that Boris Johnson will continue as a hard brexiteer because as history shows us he is an absolute opportunist. The moment he becomes prime minister he will flip flop and show a much more soft rhetoric towards No deal and keep theresa's deal but with a few changes. The pound will recover. Positive news will move the GBP a lot more now then negative.
The general election and the no confidence vote is what I am more peculiar towards as that will defiantly weaken the pound in the very short term.
The general election and the no confidence vote is what I am more peculiar towards as that will defiantly weaken the pound in the very short term.