Where The British Pound Is Headed

Brexit optimism has backed the GBP well

- Andrew Leong

In September, the British pound edged higher on renewed optimism that Brexit could be resolved. The pound sterling rallied against most of its peers after the U.K. law was passed to effectively bar a no-deal Brexit before Parliament was suspended. This made it impossible for U.K. Prime Minister Boris Johnson to crash the U.K. out of the EU without a deal or the consent of Parliament. The new bill passed also requires Johnson to come up with a Brexit deal by October 19 or face having to ask the EU for a Brexit deadline extension to January 31, 2020. Meanwhile, the sterling soared as traders welcomed Johnson’s humiliating defeat after Parliament tore up his Brexit strategy and denied his request for a snap election, tempering fears of further political turmoil. Elsewhere, optimism for the sterling edged on as risks of a chaotic Brexit seem unlikely now that Johnson is considering establishing a border with the EU in the Irish Sea, in replacement of the backstop covering the U.K.’s land border with Ireland. This will overcome a huge obstacle that prevented Parliament from approving the deal previously.