Sterling saw its fair share of ups and downs on Wednesday, getting a boost from talk of developments with the Irish backstop discussions, then falling back down as these did not come to fruition. GBP bounced up over 0.5% against the USD on news reports that the EU was prepared to compromise on elements of the Irish backstop issue, dropping when Northern Ireland’s Democratic Unionist Party (DUP) came back in opposition to the suggestion and again when it became clear that the EU denied the rumours.
Well, Mr Johnson went to Luxembourg and his trip was either very successful or pointless, dependent on which side of the negotiations you prefer to believe. It largely bypassed the markets; Sterling held on to the gains it made last week and GBP even strengthened a little more against the Euro. Boris Johnson was bored of the booing, so didn’t attend the press conference, but did say that the EU is fed up of the Brexit palaver and wants a deal done. Don’t we all? Today there is a vacuum where UK data usually sits in the diary. So the UK’s departure from the EU will be the main driving factor for the Pound. And I rather like the suggestion that Brexit has become a toxic word with negative connotations, so the term ‘UK Independence’ is a better term..
The European Central Bank (ECB) has cut its deposit rate to a record -0.5%, lowering the euro against major currencies, including the Pound.
The ECB lowered the commercial bank rate by -0.1% and introduced a range of measures to encourage more bank lending and stimulate the Eurozone economy against a “protracted weakness” exacerbated by the US-China trade wars. It left its benchmark consumer rate at 0%.
The central bank announced at its September money policy meeting that it will also restart its Quantitative Easing bond purchasing programme in November at €20billion a month. This will continue as long as necessary, until interest rates start to rise again. The ECB is introducing two-tier system for long-term loans, in which part of banks’ holdings of excess liquidity will be exempted from the negative deposit facility rate.
Opponents of a “no deal Brexit” last night dealt a blow to new UK Prime Minister Boris Johnson. The government was defeated by 328 votes to 301, the defeat leaves the course of Brexit unresolved, with possible outcomes still ranging from a turbulent ‘no-deal’ exit to abandoning the whole endeavour. Today, they will seek to pass a law forcing Mr Johnson to ask the EU to delay Brexit - for a third time - until January 31st unless he has a deal approved by parliament beforehand. Ahead of the vote, he said he would never accept another delay to Brexit beyond October 31st and has stated that he would call a snap general election which could come as early as October 14th. The opposition Labour party have said that they will not support an early election unless Mr Johnson took a no-deal Brexit off the table as they do not trust the Prime Minister to honour his pledge to hold an election before 31st October. Sterling has rallied on the news as Mr Johnson now runs a minority government.