Moody’s: Brexit extension removes immediate risk of no deal but prolongs uncertainty
|- Brexit extension removes an immediate risk of no-deal but prolongs uncertainty.
- UK House of Commons agreed to have a general election on December the 12th.
Moody’s credit rating agency has said that a Brexit extension removes an immediate risk of no-deal but prolongs uncertainty.
Yesterday, the UK House of Commons agreed to have a general election on December the 12th yesterday and UK opinions polls clearly suggest that the Conservative party are likely to win the most seats after a general election. "There is, however, no consensus on whether a majority government can be formed," analysts at Rabobank explained:
"PM Johnson has returned the whip to some of the Tory MPs that he ousted a few weeks ago in the hope of staving off the risk that they run an independents at the election. Also, since the European parliamentary elections support for the Brexit party has ebbed away as ‘Leave’ voters have moved back into the Johnson led Tory party.
It is our base assumption that parliament will pass a Brexit deal after an election and that the UK will move into the transition phase. However, if Johnson is reliant on the Brexit party for a majority in parliament, investors are more likely to worry about trade talks with the EU failing and the UK crashing out of the union at the end of 2020. This would have clear negative connotations for GBP.
FX implications:
GBP/USD has gained so much ground this month, from the floor of 1.22 to a high of 1.3011, of over 6%. The pair can continue higher on the prospects of a deal between the UK and EU as Brexit moves into the transition period. The 200-week moving average is located at 1.3130. The 2019 peak is located at 1.3377.
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