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Brexit Update – What’s next?

Bob Mason

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British Prime Minister Boris Johnson delivered a blow to the Pro-Remainers on Wednesday.

Johnson announced that he had requested for the Queen to suspend Parliament from 10th September to 13th October, the day prior to the Queen’s speech.

The move came ahead of Parliamentary MPs returning from the summer recess on Tuesday, 3rd September.

It’s not the first time that Parliament has been shut down ahead of the Queen’s speech, but it may be considered the most controversial.

The UK Parliament has ultimately failed to deliver on Britain’s decision, by a majority electorate, to leave the EU.

After countless extensions, the current departure date for Brexit remains the 31st October and Johnson is not planning on failing.

One issue the British PM may face, however, is hostility from Tory Party backbenchers and opposition party MPs.

There is a distinct possibility of a call for a vote of no confidence within just a matter of days of MPs returning to Office. Much will depend on whether the Speaker of the House finds an opening for the House of Commons to consider such a motion. The Speaker will have less than a working week to give MPs the opportunity to oust Johnson.

There is a second possibility for the markets to also consider. MPs had looked to block Johnson’s attempt at suspending Parliament via Scotland’s Court of Session. In response to Wednesday’s announcement, the Pro-Remainers failed to block Johnson’s move ahead of a full hearing on Tuesday.

If the markets thought that Parliament was in shambles ahead of the summer recess, they may have just realized that things could go from bad to worse…

The Court of Session

First up will likely be the full hearing at Scotland’s Court of Session on Tuesday. The judge will hear arguments from both sides and deliver a judgment on Wednesday.

Interestingly, the Pro-Remain MPs went to the Scottish courts to attempt to block Johnson’s suspension of Parliament. A judgment in favor of the Pro-Remain MPs would not just be a bad outcome for the British Prime Minister, but also for the Queen of England.

Ultimately, the judgment would indicate that the Queen’s approval to suspend Parliament was, in fact, unlawful.

For Johnson, a judgment against him would also significantly increase the probability of a vote of no confidence ahead of the 31st October. For the Pound, however, such a ruling would deliver some degree of support.

Vote of no-Confidence

In the event of a judgment in favor of Johnson, the House of Commons will have a matter of days to deliver a vote of no confidence.

A majority vote in favor would likely lead to a caretaker government until a General Election is called.

For a number of weeks, Opposition Party leader Corbyn has sought support to lead a caretaker government. Johnson’s latest move certainly gives the idea of a caretaker government more weight. It remains to be seen, however, whether Corbyn et al succeed.

One thing against those looking to oust Johnson is time.

The Pound

The Pound ended the week down by 0.90% to $1.2156.

An element of hope continues to provide support to the Pound.

Failed attempts to block Johnson’s plans to suspend Parliament should have delivered a bigger blow.

The Court of Session judgment may be the first major event of the week.

MPs return on Tuesday and expect emergency debates to take place throughout the week.

Any legislation, however, would need to also go through the House of Lords. This may thwart the plans of the Pro-Remainers to bring down Johnson’s Pro-Brexit plans.

One final thing to consider is that Johnson has continued to call for MPs to let him proceed on the basis that his ultimate goal is to force the EU into submission.

Until now, however, Johnson has kept his cards close to his chest, bringing an element of distrust into Westminster.

How Johnson tackles this in the early part of the week will be key. How the EU responds to Johnson’s latest move will also be pivotal. The EU may sit back until the Court of Session ruling. There may well be some hope that a suspension of Parliament is deemed unlawful…

Either way, expect a rollercoaster of a week for the Pound. The Pound could return to sub-$1.20 levels should Johnson’s challengers fall by the wayside.

This article was originally posted on FX Empire