Beneath the veneer, GBP bears run out of momentum
Used with permission from Bloomberg Finance LP, as of 9 July 2019.
Boris Johnson remains poised to seal and win the race for leadership of the Conservative Party on 23 July. The odds checker’s average implied probability has Johnson ahead at a staggering 83.3%, with his challenger, Jeremy Hunt, at a distant of 11.9%. Hence, it is Johnson’s race to lose.
There are a few likely paths for Johnson to navigate the Brexit web of complexity in the run-up to the 31 October deadline:
- An attempt to cobble together and refine Theresa May’s failed initiatives to gain parliamentary passage before the 31 October deadline. This looks to be off the table given the political ramifications of being tied to May’s “failed” attempts;
- No deal on 31 October. The risks for this outcome are there; but within the current parliamentary setup, it is likely to be challenged given the daunting task of achieving a two-thirds parliamentary mandate;
- Going back to the negotiating table for a deal with the European Union (EU) to replace the contentious Northern Irish backstop with a technological solution to ensure that there are no physical infrastructures at the border;
- Political posturing with a threat to crash out of the EU, leading to a general election that is contingent on getting another deadline extension; or be constrained by the parliamentary numbers, but position to get through another referendum for a mandate to achieve a no-deal outcome. This naturally also demands a time extension.
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