Boris Johnson’s Brexit rollercoaster raises few shrieks for now
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London — Boris Johnson’s threat to walk away from the EU without a trade deal is leaving most economists and traders unruffled for now.
After years of negotiations punctuated by ultimatums and standoffs before the UK finally left the bloc in January, many analysts are yet to be convinced by the prime minister’s latest threat to tear up parts of the divorce agreement he signed only a year ago — and abandon talks.
Economists from Goldman Sachs, JPMorgan and Morgan Stanley all still anticipate a deal on commerce will be in place in time for the end of December. While Johnson insists he’s willing to accept economic disruption, analysts assess that such a move at a time when Britain is struggling with the Covid-19 crisis would be a risk too far for him.
“We know how the Brexit rollercoaster went last year and we think that’s a pretty good guide,” Stephanie Kelly, senior political economist at Standard Life Investments, said in a Bloomberg Television interview. “It’s most likely we get a deal. The incentives are all still there to get a deal.”
That scepticism is reflected in foreign-exchange markets. Risk reversals, a gauge for market sentiment, show that pound investors are less bearish about the next six months than they were in 2018 and 2019, when the prospect of a no-deal departure dominated the rhetoric.
That said, the pound on Monday dropped as much as 1% against the dollar, albeit on a day when the US currency strengthened more generally against counterparts. With sterling near $1.32, Valentin Marinov, the head of Group-of-10 foreign-exchange strategy at Credit Agricole, says the rout could extend to $1.20 if no deal emerges.
The UK currency traded down 0.2% against the dollar as of 7.37am. London time Tuesday.
Johnson has set a deadline of October 15 for a trade accord, and the UK is due to leave the EU single market and customs union when a transition expires on December 31.
UK moves to row back on parts of the EU withdrawal agreement could hamper proceedings. The government plans to publish new legislation this week designed to dilute its legal force if outstanding issues on the thorny question of Northern Ireland cannot be resolved.
‘Really unhelpful’
“This is Brexit brinkmanship,” said ING’s head of forex strategy Chris Turner, who sees an even chance a deal will still be reached. “Deadlines can get extended, as we ...
After years of negotiations punctuated by ultimatums and standoffs before the UK finally left the bloc in January, many analysts are yet to be convinced by the prime minister’s latest threat to tear up parts of the divorce agreement he signed only a year ago — and abandon talks.
Economists from Goldman Sachs, JPMorgan and Morgan Stanley all still anticipate a deal on commerce will be in place in time for the end of December. While Johnson insists he’s willing to accept economic disruption, analysts assess that such a move at a time when Britain is struggling with the Covid-19 crisis would be a risk too far for him.
“We know how the Brexit rollercoaster went last year and we think that’s a pretty good guide,” Stephanie Kelly, senior political economist at Standard Life Investments, said in a Bloomberg Television interview. “It’s most likely we get a deal. The incentives are all still there to get a deal.”
That scepticism is reflected in foreign-exchange markets. Risk reversals, a gauge for market sentiment, show that pound investors are less bearish about the next six months than they were in 2018 and 2019, when the prospect of a no-deal departure dominated the rhetoric.
That said, the pound on Monday dropped as much as 1% against the dollar, albeit on a day when the US currency strengthened more generally against counterparts. With sterling near $1.32, Valentin Marinov, the head of Group-of-10 foreign-exchange strategy at Credit Agricole, says the rout could extend to $1.20 if no deal emerges.
The UK currency traded down 0.2% against the dollar as of 7.37am. London time Tuesday.
Johnson has set a deadline of October 15 for a trade accord, and the UK is due to leave the EU single market and customs union when a transition expires on December 31.
UK moves to row back on parts of the EU withdrawal agreement could hamper proceedings. The government plans to publish new legislation this week designed to dilute its legal force if outstanding issues on the thorny question of Northern Ireland cannot be resolved.
‘Really unhelpful’
“This is Brexit brinkmanship,” said ING’s head of forex strategy Chris Turner, who sees an even chance a deal will still be reached. “Deadlines can get extended, as we ...