PM Johnson: December 12th poll will get Brexit done - Times


  • December 12th poll will get Brexit done, says Johnson according to the Times. 
  • Analysts at Westpac are bearish on EUR/GBP.

Indeed, Boris Johnson’s wish for a general election on 12 December looks set to be granted after MPs voted in favour of it by 438 to 20; a majority of 418 and it now goes to the House of Lords tomorrow for a vote, which is almost a certain to pass or even be waved which should be GBP friendly. 

The Pound on the day was scoring back to the 1.29 handle vs the US Dollar but failed to hold in there considering the uncertainty that prevails over UK politics and Brexit. However, a recommendation from analysts at Westpac argues that Sterling is a buy, especially vs the euro. Indeed, the market may well be underestimating the prospects of what Brexit means for the EU and sleepwalking into a potentially bearish situation for the single currency, especially given its already worsening economy. 

FX trade ideas: Sell EUR/GBP at 0.8695

"UK's deliberation over holding a General Election may allow for a short EUR/GBP position to be entered on the basis that the election could break the Brexit impasse whilst data is likely to affirm the weakness of the Eurozone economy," analysts at Westpac explained. 

Rationale

  • UK election will be an effective poll on current negotiated deal against remaining and/or second referendum
  • UK election will negate sudden no deal Brexit risks and raise potential of breaking the Brexit impasse
  • Parties are likely to adopt post-election expansionary mandates to promote investment, spending and growth
  • Eurozone is likely to receive further weak data in coming week
  • EU/Eurozone will look to approve fiscally prudent National budget proposals in November rather than push for any expansion

Risks

  • Amendments to the Election Bill could delay the process of achieving a swift election date
  • Adopting a lowering of the voting age to 16 and including EU nationals could cause the Election Bill to be pulled
  • Polling reports  could shift to suggest a further inconclusive result and another ineffective minority Government
  • EU data upside surprises
  • EU nations outline fiscally expansionary or structural reform policies

 

 

 

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