Sterling weakened against many major currencies this week, including the euro, US dollar and New Zealand dollar. In part, this is because the financial markets aren’t so confident that the UK and the EU will agree a Brexit deal in the foreseeable future as they were last week.
This is even though the UK Supreme Court ruled that Parliament can reconvene, as Prime Minister Boris Johnson’s decision to prorogue, or suspend, the legislative chamber was declared illegal.
Meanwhile, UK economic data this week was mixed, with the UK’s manufacturing sector slowing further in September, according to the CBI (Confederation of British Industry), although the UK’s far larger retail sector exceeded forecasts.
However, although the Supreme Court’s decision perhaps makes a ‘No Deal’ Brexit less likely, it’s simultaneously stalled last week’s Brexit progress.
First, this is because, to attend the opening of Parliament, PM Johnson had to fly from the United Nations General Assembly (UNGA) in New York. Here, Mr. Johnson was meeting EU leaders such as German Chancellor Angela Merkel and French President Emmanuel Macron. So, the PM has had to cancel or delay those meetings.
Second, what with Mr. Johnson the leader of a minority Conservative government, opposition MPs are in a strong position to control Parliament’s legislative agenda. For example, the opposition parties have refused to let Parliament go to recess, so that the Conservatives can hold their annual party conference, as is convention.
Moreover, opposition MPs continue to turn down Mr. Johnson’s calls for a general election, until a ‘No Deal’ Brexit is firmly off the table. So, it’s arguable that Mr. Johnson is being held hostage in No. 10 Downing Street, unable to govern, yet with limited powers to amend the situation. This adds to the lack of Brexit clarity.
In addition, if Mr. Johnson succeeds in negotiating a new Brexit deal, he’ll need to pass this through the House of Commons. However, as the PM is the leader of a minority government, he may struggle to do this.
The EU knows this, which could make Brussels less disposed to negotiate with Mr. Johnson in the first place, if they think he doesn’t have the Parliamentary support to pass the agreement. This seemingly leaves the UK’s Brexit situation in limbo this week, which has weakened the value of sterling.