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Carney press conference after BoE remains on hold

  
  Analysis
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Mark Carney

  • Recent Brexit deal creates a possibility of a pick up in UK growth
  • World risks slipping into low growth, low inflation but many of these dynamics occurred first in the UK
  • Both reduced Brexit uncertainty and stronger world economy assumed in BoE forecasts, but neither is assured
  • Now evidence that households are doing precautionary saving before Brexit
  • Brexit uncertainties are weighing particularly heavily on business investment
  • Reduced chance of a no -deal Brexit has pushed up sterling
  • Brexit agreement reduces risk of no deal significantly
  • pick up in UK growth likely to be limited by a lack of supply capacity in the economy
  • New BoE Brexit assumptions assume transition occurs over 3 years vs previous much longer transition.
GBPUSD pushing down towards 1.2800, but that level is holding for now

What happens now that Boris Johnson has managed to strike a Brexit deal?

  
  Analysis
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We have been down this road before

Johnson

A Brexit deal is only as good as its chances to pass a vote in parliament. Just ask Theresa May how that worked out for her.

For all the optimism we’re seeing in the pound over the past week, all of that now hinges on whether or not Boris Johnson can get this deal through a parliamentary vote.
So, what are the key signs to watch for that?
The most obvious telltale sign is to watch for the stance adopted by the DUP. Just be reminded that Johnson doesn’t have a working majority in parliament so he will need all the support he can get at this point in time.
As it stands, the DUP isn’t quite on board yet so that means there is still a high chance of the deal failing to get through a vote in parliament.
What would that mean if we see such a scenario? Again, it just puts us back to a similar position when Theresa May was trying to get her Brexit deal through a vote – where she failed three times by the way.
Another possibility is if Johnson decides to couple his deal with a referendum vote in order to sway Labour lawmakers to get on his side. But that is likely a long shot and one he is almost certainly not going to pursue.
Otherwise, I still reckon it is a tall order for this Brexit deal to pass a vote in parliament at this juncture. But if the DUP and ERG gets on board, I think the pound has the potential to first head towards 1.33 before looking towards 1.35 next.

EU said to see Brexit deal as impossible unless the UK moves

  
  Analysis
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The pound sinks further on the headlines

  • Technical Brexit negotiations said to have reached an impassse
  • Brexit negotiations may collapse amid DUP resistance towards a deal
  • Fate of Brexit negotiations said to hinge on a move from London now
This is coming via Bloomberg and reaffirms the earlier sentiment that we’re reaching a bit of a sticking point as the DUP is failing to get on board with the proposed Brexit deal.
The pound has fallen further on waning optimism with cable dropping to a low of 1.2658 from 1.2730 before recovering to near 1.2700 currently.

Here is UK PM Johnson’s cunning plan to stop Brexit extension beyond October 31

  
  Analysis
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Earlier post on the UK media report on Prime Minister Boris Johnson plan to sabotage Brexit extension

  • UK press reports on UK PM’s plan to sabotage any Brexit extension
The background to this is Parliament have voted to require the PM to request an extension from the EU beyond October 31 (conditions apply but that’s the gist of it). Johnson plans to send an accompanying letter saying the UK government does not want the extension, that is it wants an exit on October 31.
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Also, more from the weekend here:
  • EU officials adamant on no further Brexit extension
Earlier post on the UK media report on Prime Minister Boris Johnson plan to sabotage Brexit extension
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