Pound hits $1.30 amid Brexit deal and trade war hopes - as it happened

Graeme Wearden

from on 2019-10-21 19:33 (#4SXM0)

Rolling coverage of the latest economic and financial news, as sterling is buffeted by political drama

Latest: Pound rises to fresh five-month high
Politics Live: Johnson to push for 'yes or no' vote on deal
Sterling rallies despite government's Super Saturday defeat
Berenberg: Orderly Brexit now likely
RBC: Johnson may have the votes for Brexit
Introduction: Murky Monday in the City

8.33pm BST

Late drama: the government has published the text of the European Union (Withdrawal Agreement) bill, ready for some titanic clashes in the Commons this week.

It's online here.

Key Clauses 32 33 and 34.
32 repeals need for Meaningful Vote (another bit of Grieve innivstion dies).
33 disapplies CRAG
34 inserts Workers Rights into legislation. pic.twitter.com/fCM5QMyVN5

remember EU Withdrawal Act 2018 (once called the Great Repeal Bill) - repealing European Communities Act In first line...

EU Withdrawal Agreement Bill 2019 first measure is to amend first line of EU Withdrawal Act 2018 and temporarily unrepeal the repeal for implementation ... pic.twitter.com/Tu281JB1z6

Last I checked, Bill Cash was not best pleased with the temporary unrepeal of the repeal - it is because EU law will still in implementation period require a conduit, because it will still apply, and there it is. Not sure why it's called implementation any more...

Also why is it still called "implementation"? Originally for 2 years or so, and it's worth thinking about this, it had been claimed this period would "implement" the future relationship that would have been negotiated by Mar 2019. It is now going to be period of negotiating that.

Publication of the Withdrawal Agreement Bill is a reminder of our weird expectations of MPs. We expect them to process 115 pages of legislation and 125 pages of notes overnight, but we also want them to be Ordinary People Like Us.

"Why We Get The Wrong Politicians", by @IsabelHardman, is very good on the frankly bonkers contradictions involved in this.

8.03pm BST

Could this be why the government isn't keen to publish the likely economic impact of its Brexit deal?

A while ago I wrote a paper in which I estimated the potential impact being in a free trade agreement (much like the one Johnson wants) would have on UK services exports to the EU.https://t.co/yaARRkgTp3 pic.twitter.com/gtMdPBtZlk

6.57pm BST

Over in parliament....

Michael Gove says the risk of no deal has "increased materially" and Operational Yellowhammer will move into its "final most intensive stage". Gove is speaking to almost empty benches and the pound is holding steady at highest level in five months. pic.twitter.com/XH6OsY3KiA

6.52pm BST

John McDonnell, the shadow chancellor, has blasted chancellor Sajid Javid for refusing to release an economic assessment of the new Brexit deal.

McDonnell says:

"Flying blind on a massive decision on the future of the economy is no way for a government to make recommendations to parliament or make legislation. It's preposterous behaviour by the chancellor and this government."

6.50pm BST

Here's our news story on John Bercow's refusal to allow a Brexit deal vote today, which has helped push the pound down to $1.2966 in late trading.

5.39pm BST

Adam Seagrave, Head of Global Sales Trading at Saxo Bank, thinks there's a 50:50 chance of Brexit happening by the 31 October deadline:

The Brexit situation is so fluid and market views are changing rapidly. GBP was initially a bit lower on Bercow's rejection announcement but has since recovered most of that move.

The balance of probability is the passing of Johnson's deal either with or without a delay which is what we have seen reflected in today and last week's GBP price action. As it stands and in our opinion, the likelihood of the next event are as follows: Pass of withdrawal deal and amendments before 31st October (50%); Extension to January 31st deadline (25%) and General election including extension beyond 31st deadline (25%).

5.04pm BST

The FTSE 100 index of blue-chip shares had closed 13 points higher at 7,163.

That's a modest move, with investors cautious as they wait for Brexit developments.

5.01pm BST

Back just below $1.30, sterling looks like a coiled spring, bursting to rise higher.

So says Chris Towner, Director at JCRA:

Boris Johnson's plan to get his meaningful vote on his deal with the EU through parliament has been thwarted by House of Commons speaker Bercow. His reasoning was that it would be repetitive and disorderly to do so. However, he did say that there is every opportunity for the government to have its way by the end of October.

Sterling has been sold off from levels above 1.30 against the US dollar as Johnson's plan to get Brexit done meets yet more obstacles. This frustration will weigh on Sterling but only to the extent that we have to wait for the timing of the inevitable vote. Sterling still looks like a compressed spring waiting for good news to lurch to another level higher."

4.34pm BST

Over in Frankfurt, the Bank of England's top economist is calling for more UK companies to report their gender pay gap.

Andy Haldane is arguing that current disclosure rules don't cover enough companies to fix the problem.

The UK government will need to insist that companies employing more than 30 people report their gender pay gaps if inroads are to be made into the persistent bias in wages and salaries, a senior Bank of England official has said.

Andy Haldane, Threadneedle Street's chief economist, said only 40% of the private-sector workforce was covered by current legislation that obliges companies with more than 250 staff members to publish details of differences in pay between men and women doing identical jobs.

3.44pm BST

City traders are taking Speaker Bercow's ruling in their stride, says Naeem Aslam of Think Markets.

Sterling experienced a small movement towards the downside on the initial statement by the Speaker and the liquidity for the Sterling/dollar wasn't moved much.....

This confirmed that traders are patient and there is no panic in the market because the extension is widely expected.

3.42pm BST

Breaking: House of Commons speaker John Bercow has refused to allow a new meaningful vote on Boris Johnson's Brexit deal.

He is citing a parliamentary rule that MPs cannot be asked to consider the same legislation twice in the same session.

BREAKING: Speaker says there will be NO meaningful vote today - he has refused to allow it.

Speaker says it is the "same matter" and therefore cannot be put to MPs again.

3.23pm BST

Here's Sajid Javid's letter:

Sajid Javid responds to @CommonsTreasury request for economic impact assessment of the latest Brexit deal.

In short, he doesn't commit to an economic analysis. pic.twitter.com/xf3gXYmY5I

3.20pm BST

The government is not releasing new economic forecasts of the impact of Boris Johnson's Brexit deal.

The Treasury committee had asked chancellor Sajid Javid whether previous impact assessment had been updated, to cover the new deal agreed with Brussels.

It would bring an end to the damaging uncertainty and delay of the past years, and allow businesses to get on with taking decisions, including around recruitment and investment.

My last point is to say that trust in democracy and bringing an end to the division that has characterised this debate over the past three years, is something that cannot be measured solely through spreadsheets or impact assessments, important though they are.

Respecting the referendum and closing this chapter so we can focus on delivering growth and the public services people deserve, is the right thing to do for our country.

The Chancellor has acknowledged that the Government's previous economic analysis of a free trade agreement does not correspond to the agreement that the Government will now be seeking.

"The Government, therefore, appears content that MPs be expected to vote blindly on its new deal. The dearth of relevant economic analysis on which MPs can decide how to vote is deeply concerning.

Chancellor says value of Brexit deal "cannot be measured solely through spreadsheets or impact assessments". Translation: there's more to life that GDP. Treasury analysis from a year ago showed FTA (circled red) of type govt wants would leave UK worse off than May's deal (blue). pic.twitter.com/uKKuCifbka

3.01pm BST

The pound's recent rally will have hurt speculators who have bet on a no-deal Brexit.

But Chris Turner and Petr Krpata of ING have spotted that the market is still substantially short on the pound -- meaning that investors are positioned for sterling to weaken.

Speculators are still short GBP and progress on Brexit legislation could see the pound rally to $1.32-$1.34. However, if new amendments head the way of a customs union, UK prime minister Boris Johnson's fragile coalition and the GBP rally could fall apart.

2.43pm BST

Trade war optimism, and hopes that a disorderly Brexit can be avoided, have lifted the US stock market.

The S&P 500 index has jumped 0.5% in early trading, gaining 15 points to 3,001.78.

U.S. stocks open higher https://t.co/GncxVeOkMt pic.twitter.com/JfXtNwjxn8

2.27pm BST

Sterling is struggling to maintain its toehold over $1.30.

The pound has dropped back from this morning's five-month high, back to $1.298, and remains volatile.

Current thinking is that the Speaker will likely not allow the MV4 to happen given the motion was already put forward and in his mind sort of voted on in the form of the Letwin amendment. If that is the case, then Johnson shifts to implementation and puts forward a Withdrawal Agreement Bill or WAB.

The WAB would likely be attacked by remainers who will add things like a potential 2nd referendum or various other 'wrecking' clauses or amendments related to customs union. If the Speaker actually does move forward with MV4 then the focus will be the vote that was originally scheduled for Saturday.

In the end, there is still a roadmap to a Brexit with a deal on Oct 31, but it will be tricky. Odds of a no deal Brexit have diminished significantly. Given there was no deal voted for on Oct 19 the PM was forced to ask for an extension from the EU, so we'll hear more about that as well today with some talking about a potential 'flexible' extension to Feb 2020.

Hard Brexit odds being reduced has GBP/USD well supported with a move up to 1.3000 in GBP/USD overnight.

2.04pm BST

Donald Trump's economic advisor, Larry Kudlow, has just bolstered today's trade war optimism by saying "things look pretty good" right now.

Echoing the positive noises from China, Kudlow also hinted that the US could abandon plans to hike tariffs on Chinese imports in December, if negotiations make progress.

[RTRS] - KUDLOW SAYS THINGS LOOK PRETTY GOOD AS U.S., CHINA TRADE TALKS CONTINUE

WHITE HOUSE ADVISER KUDLOW SAYS IF PHASE ONE #CHINA TRADE TALKS GO WELL, DECEMBER TARIFFS COULD BE TAKEN OFF - FOX BUSINESS NETWORK - RTRS

1.47pm BST

Boris Johnson urged MPs to "get Brexit done" on Saturday, as he tried to win approval for his withdrawal agreement.

That could be an attractive pitch, more than three years after the EU referendum. But it ignores the fact that the current deal only covers Britain's exit, not its eventual new relationship with the EU.

We have not made any major adjustment to our portfolios in light of the continuing uncertainties and retain a somewhat cautious stance on UK equities. A Deal would very much just mark the end of the beginning rather than the beginning of the end.

The lack of clarity over the UK's future trading relationships will surely remain a significant drag on UK growth for a long time yet, albeit less than before. That said, we have delayed reinvesting the proceeds from a European fund switch, parking the proceeds temporarily in sterling cash so as to benefit from any further rise in the pound.

From The Times: When people are told that Brexit triggers a longer phase of talks and trade negotiations, the response is often "horrified silence".#GetBrexitGone pic.twitter.com/xuoGXKxHT1

1.17pm BST

Boris Johnson got a pretty warm reception from fellow EU leaders last week.

#EU seems to be getting behind the #UK #Brexit deal. Does not mean it is a good one, just that they would like to get this out of the way and focus on other things. Remember Brexit is an asymmetric shock, so quite how hard the exit is isn't so important to them

1.10pm BST

Hopes of a breakthrough in the US-China trade talks are also lifting markets today.

China's CSI 300 index closed 0.3% higher today, and the US stock market is expected rise too.

US Opening Calls:#DOW 26833 +0.23%#SPX 2997 +0.39%#NASDAQ 7899 +0.40%#RUSSELL 1547 +0.81%#FANG 2630 +0.35%#IGOpeningCall

China's state-run Xinhua News Agency reported that Vice Premier Liu He told a conference in the southern city of Nanchang that the most recent trade talks with the U.S. made "substantial progress."

The negotiations were "building a foundation for signing a phased agreement," it said.

12.25pm BST

After a edgy morning's trading, the FTSE 100 is currently just 10 points higher at 7161, up 0.15%.

Domestic stocks are continuing to have a good day, with car sales firm Autotrader and turnaround group Melrose Industries among the risers.

11.58am BST

Sterling is still looking choppy, and has dropped back below the crucial $1.30 mark.

The City are poised for developments in Westminster, and hints about whether Brexit could happen in 10 days time, or be delayed.

No10 Brexit latest: "The meaningful vote will go ahead if the Speaker allows it and if not and amendments are selected which wd render the vote pointless, there's no point having a meaningless vote. The Govt wd pull the motion."

Key quote from PM's spokesman:"The deal with the EU has just been agreed. It is done. It is closed."
A hint that wd pull bill than go ahead with customs union amendment?

11.44am BST

Here's a handy breakdown of the parliamentary arithmetic ahead of a Brexit vote on Tuesday, from my colleague Peter Walker:

Current projections put the vote at a dead heat. Johnson's side is boosted by 20 former Tories who now sit as independents but are supportive, and various other independents such as Brexit-minded former Labour MPs including Ian Austin and Frank Field.

The key will be how many current Labour MPs the government can tempt over. On Saturday, six voted with the government against Oliver Letwin's amendment to delay approval of Johnson's deal - Kevin Barron, Ronnie Campbell, Jim Fitzpatrick, Caroline Flint, Kate Hoey and John Mann. They could all be expected to back the deal.

How the numbers add up on Brexit deal and possible amendments https://t.co/U5YC1mpcun

11.17am BST

Newsflash: Germany's central bank fears that its economy has kept shrinking.

In its monthly report, the Bundesbank has predicted that German GDP may have contracted in the third quarter of 2019.

Germany's economic output could have shrunk again slightly in the third quarter of 2019.

The decisive factor here is the continued downturn in the export-oriented industry."

"Early indicators currently provide few signs of a sustainable recovery in exports and a stabilisation of the industry.

"This raises the risk that the slowdown extends to a greater extent to more domestically oriented sectors."

10.51am BST

Bloomberg has also calculated that Boris Johnson could just have enough support for his deal.

10.33am BST

The pound typically falls whenever a no-deal Brexit looks more likely, and rises when it doesn't.

So, today's small rally reflects relief that Johnson has sent a letter seeking an Article 50 extension, while still pressing on with Brexit votes this week.

Have had 1.30 for end Q4 since May! Only question is how far the relief rally runs and how durable it is. This depends on the extent to which there is a recovery in business investment after no-deal is avoided and how much of a growth pickup we see. Lots of messy global factors pic.twitter.com/yFzDlYlcAL

10.22am BST

Deutsche Bank's Jim Reid: "The next 36 hours will be absolutely crucial in the whole Brexit saga.... hang on... I'm sure we've said that about 12 times in the last year."

9.58am BST

Julius Baer, the Swiss private bank, reckons Boris Johnson has a nearly 50% chance of getting his deal through parliament

David Alexander Meier, of Julius Baer's economic research team, argues that more MPs could be persuaded to back the government now that a disorderly Brexit on 31 October now looks less likely.

Saturday's events were another blow to Johnson, but the deal on 31 October is not dead yet. Johnson plans a next meaningful vote on the deal already today and hopes to pass the legislation (Withdrawal Agreement Bill) this week.

Hefty debates are to be expected, as the sittings will offer the critics plenty of targets, with House Speaker Bercow once again having the potential to tip the scales by setting the agenda. The opposition could try to amend the legislation to prescribe a Customs Union with the EU or a public referendum on the deal. Meanwhile, the Scottish Nationalists are warming up for further court action against Johnson due to his unsigned letter.

9.48am BST

Michael Brown, senior analyst at currency firm Caxton, predicts the pound could keep rising...

"Sterling has risen above the key $1.30 level this morning for the first time since May, as optimism that a Brexit deal will pass in the Commons continues to build. The numbers now appear to be present for a 'meaningful vote' on the new Brexit deal to succeed, however it remains unclear whether Speaker Bercow will permit such a vote to take place.

"Should a vote not take place, attention will shift towards tomorrow's vote on the 2^nd reading of the Withdrawal Agreement Bill - the legislation that implements the deal in the UK. Such a vote, if passed unamended, would pave the way towards an orderly Brexit, and should see the pound continue to press higher."

9.43am BST

Sterling is also stronger against other currencies, gaining 0.15% against the euro this morning to a1.163.

Sterling trades briefly above 1.30 handle. Currently:#GBP +0.16% against other currencies#GBPUSD 1.29946 +0.2%#EURGBP 0.86015 -0.15%#GBPAUD 1.88976 -0.08%#GBPJPY 141.161 +0.34%#GBPCAD 1.70429 +0.13%#GBPCHF 1.2797 +0.28%#GBPEUR 1.16258 +0.14%

Pound:
Touched above $1.30 pic.twitter.com/eWMv5Rk7iO

9.33am BST

NEWSFLASH: The pound just hit the $1.30 mark, as the City cling onto hopes that a disorderly Brexit can be avoided.

"There are now renewed hopes Prime Minister Boris Johnson can get his deal through today, although there are likely to be further twists in the Brexit saga no matter what happens in Westminster later."

9.20am BST

Little by little, the pound is nudging towards the $1.30 mark against the US dollar.

It's not been that high since the middle of May, but speculation that MPs could approve Johnson's deal this week is giving sterling a lift....

9.17am BST

The Financial Times has estimated that Boris Johnson has got enough votes to get his Brexit deal through parliament, just...

FT analysis suggests Mr Johnson could now have a slender Commons majority of five for his Brexit deal.

If Mr Johnson wins the second reading vote, then Brexit is back on track. The prime minister would move a "programme motion", which MPs would vote on, to railroad the withdrawal agreement bill through the Commons in record time.

9.05am BST

Brexit uncertainty is dampening the UK housing market, according to online estate agent Rightmove.

October is usually a strong month for house prices, after the summer holiday lull. But this year, prices only rose by 0.6% --the weakest since October 2008 (when the financial crisis was kicking off).

9.01am BST

After a bumpy start, Sterling is continuing to creep back towards Friday's five-month highs, after its earlier slide:

The UK Pound has rallied a little since last Night's opening for the week and is now US $1.293 #GBP https://t.co/DMVDQ8ppQL

It's a massive week for the pound and for Brexit. The PM suffered a setback on Saturday and was forced to send the dreaded letter to Brussels asking for an extension, but left it unsigned and sent another (signed) missive saying delay is disaster.

It looks like Boris Johnson will make another stab at winning parliamentary support for his Brexit deal. We need to see if Speaker John Bercow allows it - his record on frustrating Brexit is well known. Otherwise the government will bring forward implementation legislation quickly to drive through the bill in time so that a delay is not required. The government thinks it has the numbers for the deal in its raw form to pass.

8.51am BST

Our Politics Live blog has all the action from Westminster, as the government tries to persuade Commons speaker John Bercow to allow another Brexit vote today:

8.49am BST

Despite jitteriness about another Brexit delay, most European stock markets have risen in early trading.

That reflects optimism that Britain will avoid crashing out of the EU eventually (see Berenberg's forecasts).

8.33am BST

The financial markets were closed during Saturday's historic parliamentary session on Brexit, so investors are now reacting to events.

This chart shows how the pound fell sharply last night once trading resumed in Asia, dropping from nearly $1.30 to below $1.29. But it's now staging a minor recovery.....

8.26am BST

The ongoing Brexit deadlock is actually more damaging to Europe than a no-deal scenario, claims France's European Affairs Minister.

Amelie de Montchalin told BFM TV this morning that the EU must not become "paralysed" by the ongoing uncertainty over Britain's position.

"What is certain is that we need a 'Yes' or a 'No' before October 31. We need clarity. The worst of Brexit is the uncertainty.

"There cannot be a new delay without it being justified... Europe cannot be paralysed," she added.

"One cannot rule out a Brexit within 10 day"

8.09am BST

Britain's FTSE 100 index has opened cautiously higher, up 16 points higher at 7167.

UK-focused stocks such as housebuilders and banks are among the top gainers, with Taylor Wimpey up 2% and Lloyds Banking Group up 1.2%.

8.06am BST

Despite his setback on Saturday, Boris Johnson is now more likely to take Britain out of the EU with a deal.

So argues German bank Berenberg, which has just slashed the chances of a disorderly Brexit - and of Brexit being cancelled.

The residual risk could come into play if a) a surprise surge in support for Nigel Farage's Brexit Party before or in an election were to force Johnson to disavow his own deal; or b) if the UK and EU fail to strike a deal on their future economic relations by the end of the transition period.

7.50am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The numbers are actually shaping up in the government's favour.

The Letwin amendment has paved the way for more Tory rebels to back Johnson, and having been estimated at a few votes short on Saturday, most expect the govt will reach the magic 320 tomorrow....

Though government ministers are trying to claim the risk of no deal has increased due to the Letwin amendment, bookies suggest it has done the opposite. We agree and think the kneejerk pound weakness will be bought into.

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