Prime Minister Boris Johnson lost another two crucial votes in the Houses of Parliament yesterday. Firstly, MP’s backed the second and third reading of a bill that prevents the UK from leaving the European Union without a deal on Oct 31st forcing the PM to request a 3-month delay to Brexit.
Johnson complained that parliament had scuppered his Brexit negotiations, labelling the motion as the surrender bill and said the only other option now was to let the public decide what happens by calling a general election on Oct 15th.
However, for this to become a reality, two thirds of parliament needed to support the idea. The Labour party abstained, convinced the timing of the election is a trick leaving the government with just 298 votes in favour of an election versus 56, far short of the 434 required.
With the chances of no-deal Brexit now slimmer the pound enjoyed its best day against the US dollar in over 5 months and gained over a cent against the euro.
GBPUSD rose from an early morning low of 1.2098, for the majority of the day, hitting 1.2208 at lunchtime and then climbing further in the evening eventually topping out at a 1-week high of 1.2254. This morning has seen the rises continue, GBPUSD touched a high of 1.2283.
GBPEUR traded in a similar pattern, rising from an early low of 1.1023 to 1.1086 at 12:30pm and then again to a high of 1.1110 late in the evening. This morning has seen the pair reach a 5-week high of 1.1136.
The US dollar fell on Wednesday for a second session in a row as investors became less risk averse. Improving political developments around the world prompted a rise in the selling of perceived safe- haven currencies. Hong Kong’s leader Carrie Lam announced the controversial extradition bill which has caused months of violent protests would be withdrawn causing a surge in risk appetite.
Additionally, Italian Prime Minister Giuseppe Conte unveiled a new cabinet comprising of anti-establishment 5-Star members and centre left Democratic Party members which is expected to improve Italy’s rocky relationship with the European Union.
The dollar index fell to a low from a high of 99.34 on Tuesday to a low of 98.39 yesterday.
The euro strengthened as ECB President hopeful Christine Legarde said accommodative monetary policy was necessary, but the central bank needed to remain mindful that the use of such tools for a sustained period of time may end up having a negative impact. Investors felt the comments could mean the ECB’s next moves might not be quite as dovish as initially thought.
EURUSD opened at 1.0989 and rose for most of the day to close at 1.1031.
