Sep 3, 2019

Brexit back-and-forth leaves the pound reeling

British Prime Minister Boris Johnson. Photo: WIktor Szymanowicz/NurPhoto via Getty Images

U.K. Prime Minister Boris Johnson looks set to call for a snap general election on Oct. 14 if he loses a no-deal Brexit vote in Parliament this week, Bloomberg reports, citing a senior U.K. official.

Why it matters: It's the latest in the litany of Brexit back-and-forth that has left the market reeling and most of Britain uncertain about the future.

What happened: The pound fell nearly 1%, near its lowest level in a year, and is again testing its early August lows when it reached the weakest against the dollar since 1985.

  • Sterling has fallen more than 7% in the past 3 months, the worst performance among major developed-market currencies.

The big picture: The British pound also has been hit by a wave of negative data about the U.K. economy.

  • Most recently a major manufacturing survey showed the industry is solidly in contraction. The IHS Markit/CPS manufacturing PMI dropped to 47.4 from 48.0 in July, a full point lower than the median forecast in a Reuters poll of economists.
  • Britain’s economy shrank overall last quarter, largely based on companies stockpiling goods in advance of the original March Brexit deadline and a slowdown in manufacturing and business output.
  • If the economy shrinks again this quarter the country will officially be in recession.

What's next: The combination of Brexit uncertainty and the economic weakness has a growing number of fund managers betting sterling will continue falling until it hits parity with the dollar.

  • BlackRock's Rupert Harrison recently said he sees the pound hitting 1-to-1 with the greenback, following a similar parity call from Morgan Stanley in July.

Go deeper: Boris Johnson expected to call election if he loses Brexit vote

Go deeper

Everything you need to know about Brexit

Illustration: Sarah Grillo/Axios

On June 23, 2016, the United Kingdom shocked the world and voted to “Brexit,” or leave the European Union. After more than three years of uncertainty and fractured politics, the U.K. officially exited the EU on Jan. 31, 2020.

Go deeperArrowUpdated Oct 29, 2019 - World

Parliament blocks Boris Johnson from calling snap election for 2nd time

Boris Johnson. Photo: Charles McQuillan/Getty Images

On the U.K. Parliament's last night before beginning a month-long suspension, Prime Minister Boris Johnson failed for the 2nd time to earn the two-thirds majority necessary to call a snap general election.

Why it matters: Johnson was hoping to use an election to circumvent a law passed by Parliament last week that will require him to seek a Brexit extension rather than crash out of the EU without a deal on Oct. 31. The prime minister has said he would rather be "dead in a ditch" than seek an extension, but he now appears to be left with little other choice outside of breaking the law.

Go deeperArrowSep 9, 2019

British pound hits 2-month high as no-deal Brexit fears fade

Photo: John Lamb/Getty Images

The British pound rose to a 2-month high against the dollar Thursday as hopes are again rising that the U.K. will avoid a no-deal Brexit.

Driving the news: European Commission President Jean-Claude Juncker said in an interview yesterday he expects Brussels to reach a deal with Britain to leave the EU with a deal in place to avert a messy break-up.

Go deeperArrowSep 20, 2019