The next leader of the Conservative Party and the UK will be announced next week and Boris Johnson remains the favorite to take the top spot.
If there was any doubt on the Boris Johnson Brexit strategy, the last few days will have cleared things up.
The threat of a no-deal departure from the EU has been on the rise since last week’s live televised debate. Johnson was clear last week that he would not rule out any options available to deliver Brexit by the Halloween deadline.
The news hit the wires this week that Boris Johnson is, in fact, considering suspending UK Parliament for 2-weeks to ensure that MPs are unable to prevent Brexit from taking place.
It would mean that if the EU stands its ground and refuses to negotiate further, it will be hybrid- Theresa May’s deal or a no-deal Brexit.
Both candidates for the top job have stated that they are not in favor of the Irish backstop. The backstop was the reason behind the extension from 31st March.
If neither Johnson nor Hunt are in favor of Theresa May’s deal, that would ultimately mean that there’s no deal on the table.
Brexit and the UK economy
In spite of Brexit uncertainty shrowding the UK, 2nd quarter growth held up pretty well considering. In spite of the better than expected growth figures, however, the BoE’s stance on monetary policy has shifted.
Just a month ago the markets were expecting the BoE to lift rates later in the year. Fast forward to today and it’s a rate cut rather than a rate hike that is now priced in.
Economic data out of the UK on Tuesday raised some red flags. While wage growth accelerated in May, claimant count and employment change numbers were less impressive.
Looking at today’s numbers, the annual rate of inflation held steady at 2%, giving the Pound much needed support. The rest of the numbers disappointed, however. Consumer prices stalled in June, which was worse than a forecasted 0.3% rise. The producer input price slid by 1.4%, which was far worse than a forecasted 1% decline.
Much will depend on tomorrow’s retail sales figures, however. If last Tuesday’s BRC retail sales monitor numbers are anything to go by, there could be more pain to come for the Pound.
It’s not just the numbers, its politics and ultimately Boris Johnson’s stance on Brexit.
There is a curveball, however. Jeremy Hunt could win and that would give the Pound a boost and give the BoE some breathing room… It would be quite a curveball though.
At the time of writing, the Pound was down by 0.07% to $1.23988. Even tomorrow’s retail sales figures may not be enough to stop a slide to $1.22 levels.
This article was originally posted on FX Empire
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