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Tim Riddell, senior market strategist at Westpac, suggests that Brexit is still the paramount issue in UK and it became more acute as opposition parties fumbled attempts to foster cross-party support to block a no-deal.

Key Quotes

“This week PM Johnson irked EU-27 by suggesting that the Irish “backstop” be dropped as he prepared to visit Berlin, Paris and G7’s Biarritz summit this weekend.”

“The maths of UK politics mean that gaining support for any Brexit stance is difficult, if not impossible. However, a withdrawal treaty without a backstop might just gain support. Unfortunately it won’t wash with EU-27. UK has persistently underestimated the cohesion of EU-27 and their support for Ireland and this is unlikely to alter unless no-deal risks become too high for comfort.”

“Oddschecker’s no-deal probability has risen from sub20% in May to over 40% now. Bloomberg’s Brexit Barometer may suffer periodic discrete moves, but it displayed deterioration (higher) into August.”

“GBP is unlikely to sustain rebounds unless a break in the backstop impasse can be found. Although some sound GBP support appears to have been found at recent extremes (GBP/USD below 1.20 and EUR/GBP above 0.93), no-deal downside risks clearly remain.”