The British Pound has fallen to $1.24 from $1.26 just a few days ago on plans by Boris Johnsons’ team to suspend parliament during the crucial days ahead of the halloween deadline.
According to Sky News, Johnson’s campaign plans to have the Queen’s speech in early November with parliament usually suspended two weeks prior to the Queen’s speech.
“Insiders have confirmed they are looking at scheduling a Queen’s speech to mark the start of a new parliamentary session in early November,” they say.
Pound is now very close to falling below €1.0x with both conservative leadership contenders ruling out any time limit to the backstop even though that was the only deal that managed to get a majority in Parliament.
“The backstop, as it is, is dead … I don’t think tweaking it with a time limit will do the trick, we’ve got to find a new way,” Jeremy Hunt said with Johnson adding: “No time limit.”
They’re thus throwing out what has been negotiated in three years, and apparently plan to come up with a whole new deal in three months.
Yet many are taking this as a commitment to no deal, with UK potentially losing complete access to Europe in three months.
Whether this is just posturing to the average 57 year old conservative members, is not clear, but a new Prime Minister will now be announced next Tuesday.
From then on, greater clarity should be reached as UK finds itself in a complex and even precarious position.
They’re pinning their hopes on a trade deal with America, but nationalist Trump may well drive a very hard bargain. Worse, Trump might be voted out next year during the Presidential election, leaving Boris to negotiate with Democrats.
In Europe, Macron may well prefer no deal. He pushed for it in March in at first suggesting a refusal of extension and then in asking for the shortest time possible.
Germany however would probably want to get some sort of arrangement with top European countries in combination selling to UK about $320 billion worth of goods, while they buy from it $220 billion a year.
Making it a significant trade deficit and thus giving UK some considerable bargaining power, but it’s not clear how this may change if UK does leave with no deal.
The pound clearly was worth a lot more primarily because of UK’s membership of the the EU. Thus the pound could buy more and the richer UK could import more.
With the pound in a freefall, UK could well be selling its goods at a discount, so exporting more than it imports and so getting paid less for the same amount of work. Meaning the country would become poorer.
That future estimate of economic behavior may well lead to different calculations of bargaining power in France, with it difficult to see what sort of agreement can be reached in three months considering the vast complexities, both politically and economically.
Meaning chances of a no deal have just increased further, with UK potentially exiting Europe in a way few promised or even predicted.