Above: File photograph of Sir Keir Starmer, Labour's shadow Brexit minister. Image © Chris Boland, www.chrisboland.com
The British Pound advanced to fresh multi-week highs against the Euro, Dollar and a majority of major currencies on Tuesday, August 27 with analysts attributing advances to ongoing attempts by opposition political parties to prevent a 'no deal' Brexit on October 31.
Sterling remains beholden to Brexit sentiment, and at the current time it appears that the pendulum is swinging away from 'no deal' with the opposition Labour Party suggesting that they will see to pass a law that forces the Government to request an extension to the Article 50 period in the event of no new deal being reached between the UK and EU.
"Sterling trading higher again today," says Neil Jones, a trader at Mizuho Bank, "I suggest on reports indicating the opposition will look to form a plan into law starting today, to stop a no deal on the 31st October or rather deal A50. The sense is in the market, the measure would be more likely to succeed rather than a vote of no confidence to topple Boris Johnson."
Labour Party leader Jeremy Corbyn hosted talks with opposition parties on Tuesday and it was agreed that passing a law to force the government to seek a delay to Britain’s EU departure would likely prove more effective than attempting to topple the government and replace it with a caretaker regime.
Sir Keir Starmer, Labour's shadow Brexit minister, told BBC Radio 4 earlier today:
“I was very supportive of the measures earlier this year to pass legislation to prevent no-deal and I’m very supportive of them now.
“I think they’re direct, I think they’re effective and I want something with a legal edge, because with a vote of no confidence it goes into the questions of conventions, who does this, who does that. The two aren’t mutually exclusive of course, you could do the two together.”
Markets are judging this strategy to have more merit than alternative attempts at avoiding a 'no deal' scenario, and the gains by Sterling build on those realised last week following news that the EU is willing to explore requests by the UK to thrash out a new deal.
The Pound-to-Euro exchange rate has rallied to a near-month high at 1.1086 over the course of the day, while the Pound-to-Dollar exchange rate also recorded a near-month high at 1.2306.
"A stronger U.K. Pound held within reach of last week’s close to one-month high against the greenback. Hopes that Britain’s Parliament would make a concerted push to avoid a disorderly Brexit in late October have eased downward pressure on sterling. Still, the pound doesn’t appear to be out of the woods given how underlying sentiment hasn’t materially brightened," says Joe Manimbo, a foreign exchange analyst with Western Union.
Corbyn had previously urged other parties to vote down the government of Boris Johnson and install him as a caretaker Prime Minister in order to prevent a 'no deal'. However, it became clear that the opposition to Corbyn assuming power could ultimately leave the UK without a government as the clock ticked down to Brexit.
"We are going to come together and do the right thing by our country," said Anna Soubry, leader of The Independent Group for Change Party. "We are up against a prime minister who has no mandate for this and I think he has no regard for parliament."
Progress between the EU and UK on the alteration of the existing Brexit deal is also proving supportive of Sterling.
Johnson last week held talks with German Chancellor Angela Merkel, French President Emmanuel Macron and European Council President Donald Tusk about his demand that the Brexit deal on offer is changed to remove the Northern Ireland border backstop, a policy designed to prevent the return of a 'hard' border in Ireland.
However, if utilised, the backstop would undermine the UK's sovereignty and it is therefore loathed by many Brexit supporters and is a large reason why the deal struck between Theresa May and the EU was voted down three times.
Above: Sterling is the best performing major currency on Tuesday
Johnson is due to talk by phone with European Commission President Jean-Claude Juncker on Tuesday and earlier spoke to Dutch Prime Minister Mark Rutte.
The Telegraph on Tuesday reports Johnson's Brexit adviser David Frost would travel to Brussels on Wednesday for informal discussions.
EU officials say they are listening to Johnson's arguments to replace one of the most hotly contested elements of the divorce agreement, something the bloc has previously said it will not agree to.
A British official quoted by Reuters said it was felt there had been a softening in the EU's rhetoric around the backstop.
"if a no-deal Brexit is prevented in October, as we expect, the pound should still experience a strong rebound, and so we keep our forecasts unchanged for GBPUSD at 1.29 and EURGBP at 0.87 in three months," says Thomas Flury, a Strategist at UBS.
EUR/GBP at 0.87 converts to GBP/EUR at 1.15.
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