Saturday 21 September 2019

Johnson's woes see the pound rally again

Britain's Prime Minister Boris Johnson. Photo: AFP/Getty Images
Britain's Prime Minister Boris Johnson. Photo: AFP/Getty Images

David Chance

THE pound rallied for a third day yesterday and looked set for a big bounce back against the euro and dollar after the UK parliament took control of the Brexit process from UK Prime Minister Boris Johnson.

The apparent lower risk of a crash out Brexit next month also boosted stocks exposed to the UK, including Bank of Ireland where shares surged by more than 9pc at one stage yesterday, helping lift the whole Iseq index of Irish shares.

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Sterling has been the worst performing major in the world this year, but staged a rebound to trade at levels stronger than 90p to the euro from a low to the euro of 91.46p on September 3.

"So far, sterling has benefited from the mix of the success MPs have had in legislating against no-deal Brexit and the stretched short pound positioning," investment bank ING said.

"But with early elections looming, we expect the pound to soon restart its weakening trend, given election uncertainty and the non-negligible risk of a no-deal Brexit if the Conservative party win a parliamentary majority under prime minister Boris Johnson," according to its economists James Smith and Peter Krpata.

Their view seems to run counter to the expectations of most economists, at least according to a Reuters poll that said if there were a negotiated Brexit, the pound would trade between 85-88p against the euro. The median forecast range was 95-100p in the event Britain crashed out without a deal, according to the poll of 66 economists.

Mr Johnson is now pressing for a general election and his Conservatives Party has a commanding lead in opinion polls over the Labour Party as they have won over the support of the Brexit Party with the shift in stance from ex-prime minister Theresa May.

"If an election does end up taking place, based on headline polls alone, Mr Johnson's prospects look good," the ING analysts said. Electoral calculus, a polling data website, says Mr Johnson could win 350 seats, well over the 320 he needs for a working majority in parliament, he said.

However an election cannot be called without opposition support.

Irish Independent

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