The Euro/GBP is back to where it was before Boris Johnson took over as Prime Minister, from Teresa May, in July 2019. After 3 years of hell after the Brexit referendum where Teresa May was the custodian of the negotiations with Brussels, a lady woefully unprepared in leadership skills for such a difficult task. Three times she came to Parliament with her deal, featuring the Irish Backstop, and three times she failed. Her own backbenchers and ministers rebelled against her plans with a series of high profile ministerial resignations e.g. Andrea Leadsom and so on.
Three or four months on from the summer shambles in Parliament with seemingly no way to go, it looks like there is indeed light at the end of the tunnel. After the Benn Act in Parliament made it extremely difficult for Johnson to go ahead with a no-deal Brexit on October 31st.
A constructive meeting with the Irish Taoiseach, Leo Varadkar, seemed to change the tone with a new “pathway to an agreement”. Varadkar has been a kingpin in the EU stance. It appears the DUP (Democratic Unionist Party), have shifted their red lines to allow some sort of compromise and EU and UK negotiators are now sweating the details over the weekend. Things looked dire after a difficult phone conversation between Merkel and Johnson early last week and the pound moved down to historical lows, but Merkel, as well as the UK, needs a Brexit deal, given that the German economy is on the verge of a technical recession. No one in the EU, in fact, needs a hard crash out by the UK on October 31st, despite what Nigel Farage says that “it’ll be fine”. I believe it would be fine in the end but November and December would be horrible and probably longer.
The treatment of rebel Tory MP’s like Ken Clarke has been appalling, but it seems that Dominic Cummings and Johnson have had a plan all along to drive their deal through Parliament, “do or die”.
Who is Leo Varadkar ?
The modern position of Taoiseach was established by the 1937 Constitution of Ireland and is the most powerful role in Irish politics. The office replaced the position of President of the Executive Council of the 1922–1937 Irish Free State.
Leo Eric Varadkar (born 18 January 1979) is an Irish Fine Gael politician who has served as Taoiseach, Minister for Defence and Leader of Fine Gael since June 2017. He has also been a Teachta Dála (TD) for the Dublin West constituency since 2007. He was born in Dublin and studied medicine at Trinity College Dublin. He spent several years as a non-consultant hospital doctor, eventually qualifying as a general practitioner in 2010. In 2004, he joined Fine Gael and became a member of Fingal County Council and later served as Deputy Mayor. He was elected to Dáil Éireann for the first time in 2007. He later served in the Kenny Government, as Minister for Social Protection from 2016 to 2017, Minister for Health from 2014 to 2016 and Minister for Transport, Tourism and Sport from 2011 to 2014.
In May 2017, Kenny announced that he would resign as Taoiseach and Fine Gael Leader. Varadkar stood in the leadership election to replace him; although more party members voted for his opponent, Simon Coveney, he won by a significant enough margin among members of the Oireachtas, and was elected leader on 2 June. 12 days later, he was appointed Taoiseach, and at 38 years old became the youngest person to hold the office. During the 2015 same-sex marriage referendum, he came out as gay, becoming the first Irish Minister to do so. He is Ireland's first, and the world's fourth, openly gay head of government in modern times and he is also the first Taoiseach of Indian heritage.
What next for Brexit, the GBP and stock market?
The Euro has been falling heavily against the pound and expectations that this pattern will continue
It was quite a move by some of the Brexit sensitive companies on the FTSE on Friday. Lloyds was up 12% to 59, as the banking sector is particularly prone to the fall out from a no-deal Brexit and crash out on October 31. I am long the bombed-out Metro Bank (MTRO) for this reason. Housebuilders also rebounded strongly. FTSE futures are marginally up at the moment but all depends on the negotiations moving from headline-grabbing hysteria to action.
Given Currency and bond traders often know the score better than most, and the fact that sterling has moved out of a bearish range and brokers like Deutsche are saying things like,” the latest Brexit developments are a potentially pivotal moment. We cannot recall a tine during the process at which Irish gov raised expectations to this extent ....we are no linger negative in the £”.
Negotiators from the UK and EU are having what has been described as "intense technical discussions" in an attempt to agree on a new Brexit deal. About a dozen British officials, including the UK's EU adviser David Frost, are taking part in the talks at the EU Commission in Brussels. The first public announcement on the talks may come on Monday after the EU's 27 ambassadors have been updated on the progress so far.
On Friday, Donald Tusk said he had received "promising signals" from the Irish PM, before adding: "Of course there is no guarantee of success and time is practically up, but even the slightest chance must be used". Boris said it is not "a done deal. The best thing we can do now is let our negotiators get on with it."
Speaking on BBC Radio 4's Today programme, Culture Secretary Nicky Morgan reiterated that "lots of details" needed to be worked out between both parties but said the "mood music" on negotiations "seems positive".
It is going be a very exciting week next week for currency and equity traders in UK stocks. GBP/Eur, GBP/USD, GBP/CHF as well as retailers, banks, financials and other economically sensitive stocks will be highly volatile as negotiations go on. Johnson, it seems to have a “super Saturday” vote on October 19th, after the EU Council summit on October 17th this week. MP’s will be given a choice of a Johnson deal or another delay in the exit day. Very intersting…could this finally be the beginning of the end of the Brexit hell?? It would be great to move onto something else!