Rabobank analysts point out that the UK Conservative Party will announce its new leader who will become the new Prime Minister.
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“Hard Brexiteer Johnson is favourite to take over from PM May. However, the parliamentary arithmetic has changed and he will struggle to deliver his “do or die” pledge to leave the EU on October 31. Based on comments from prominent EU officials, it is very unlikely that he will be able to secure a much better deal with the EU than his predecessor whose Withdrawal Agreement was rejected on three occasions by parliament.”
“Johnson’s ultimate solution would be a hard Brexit and he may even consider suspending parliament. That said, MPs passed an amendment to a Northern Ireland bill that prevents the new Prime Minister from requesting a suspension of parliament between October 9 and December 18. Essentially, political uncertainty will not diminish and will continue to weigh on sterling in the coming months.”
“It is worth noting that speculators increased their bearish bets against GBP to the highest level so far this year, almost matching the August 2018 high. This reflects increasingly negative sentiment towards sterling, which has been the worst performing G10 currency versus the dollar since May.”
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