Plummeting Pound Rebounds as PM Johnson is Thwarted

September 06, 2019

There has been a flurry of updates on the Brexit saga over the last three weeks, starting with the leak of the Yellowhammer doomsday report on August 18th to Wednesday’s stunning news of British Members of Parliament (MPs) successfully pressing forward on a measure to foil a no-deal Brexit. Throughout that time ­— and since the Referendum — the pound sterling has taken varying degrees of “pounding” based on these Brexit updates, and this week was no different.

In today’s chart, we show the intraday moves of the USD/GBP spot rate over the last three days. On Tuesday, September 3rd, MPs exerted their legislative muscle and debated the merits of a bill designed to prevent a no-deal Brexit on October 31st. In a sharp early sell-off that morning, the pound nosedived below the October 2016 “Flash Crash” dip and hit a 34-year low. The slump came amid growing fears that Britain could crash out of the European Union sans divorce agreement and the possibility of a snap general election. By that evening, however, MPs had voted 328 to 301 to seize control and presented a formal debate on the proposed legislation, delivering Prime Minister Johnson’s first legislative defeat in the House of Commons and causing the pound to rebound from the intraday low. And we saw the pound continue to rise in conjunction with PM Johnson’s second loss on the following day — MPs voted 329 to 300 in favor of the proposed legislative block on a no-deal Brexit. While it is unknown whether the pound will continue to climb, the MPs’ steps towards ensuring that the worst-case Brexit scenario would be avoided appeared to placate currency traders and the market.

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