Morning Commentary: Yes, No, Maybe…

Foreign Exchange - Morning Commentary
Yes, No, Maybe...
Share this story:
Andrew Kositkun
Andrew Kositkun
Foreign Exchange Head Trader
Heading into this last weekend, markets were bracing for a binary outcome to last Saturday’s Brexit vote with Parliament scheduled to vote yes or no on PM Johnson’s deal.  As it turns out, it was a resounding maybe.

Ultimately, the planned meaningful vote didn’t take place as the government, instead, voted to approve the Letwin amendment and withdrawal the main motion.  The Letwin amendment delayed approval of PM Johnson’s deal and forced the government to send a letter to the EU requesting a delay to the October 31 deadline.  As such, PM Johnson has sent a request to the EU (unsigned and accompanied by a second letter).  While French President Macron has stated many times that the EU will not grant an extension, my view is that the EU ultimately will.  However, the EU most likely will be in no rush to do so.  A response is not due until 11 pm GMT on October 31, and the EU is likely to use a “wait and see” approach to how things unfold in the UK parliament. 

Given this, do expect the GBP to have support as it appears the parliamentary math is shifting towards the government’s favor.  This shift in parliamentary math is the key driving force behind why the government is expected to seek another vote today, with the speaker expected to announce around 3:30 pm London time whether or not another meaningful vote will be held.  The expectation is that the speaker will not allow another vote as the government’s motion is the “same in substance” as one tabled earlier in the session and cannot be brought forward again; the speaker denied PM May a third vote on the same grounds.

The government is also expected to bring forward its Withdrawal Agreement Bill (the legislation that sets out the negotiated terms of the UK’s withdrawal) for a second reading.  Parliament will then choose whether or not to allow the introduction of the bill.  However, it is important to remember that even if the government approves the introduction of the bill, it does not constitute Parliament’s approval of the government’s deal.  Should an introduction be approved, the second reading will take place tomorrow at the earliest. 

Ultimately, things remain fluid as PM Johnson continues to try and get his deal passed this week.  Expect GBP volatility to remain high due to headline risks as both sides continue to play political chess.
  • Over the weekend, China’s Liu He stated that the two countries have made “substantial progress” in laying the groundwork for a phase-one deal. One of the key remaining issues is China’s desire to have the US commit to holding off on Dec. 15 tariff increases in exchange for the full amount of Trump’s touted $40-50B in agricultural purchases.  To this end, Larry Kudlow, Director of the US National Economic Council, acknowledged the US’s willingness to remove December tariffs. 
  • China is also seeking $2.4 billion in retaliatory sanctions against the US for non-compliance with a WTO ruling in a tariffs case dating to the Obama era.  In July, WTO appeals judges said the United States did not fully comply with a WTO ruling.
  • Canada holds its Federal elections today.  Polls continue to show a tight race as well as a 90% chance that no party has a majority.  The impact on USDCAD should be minimal given the strong likelihood of a minority government and large overlap between policies for two leading parties.
If we can help you with any Foreign Exchange needs, please email or call (800) 447‑4133.
Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!
Follow City National Bank on social media:
Facebook Twitter LinkedIn Google Plus YouTube
Non-deposit investment products:
Are not FDIC insured,
Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and
Are subject to investment risks, including possible loss of the principal invested.
This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. City National Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
Unsubscribe from this list  |  Update email preferences
This message has been sent to Please do not reply to this email. To ensure the delivery of future emails, please add to your email address book or safe sender list.
Copyright ©2019 City National Bank – All Rights Reserved.
350 South Grand Avenue, 12th Floor, Los Angeles, CA 90071
City National Bank is a subsidiary of Royal Bank of Canada.
Equal Housing Lender
NMLSR ID# 536994 | City National Bank Member FDIC


Popular posts from this blog

Fidelity: Bollinger band stock signal