UK Brexit Scenarios Under Johnson

0 119

The issue of Brexit has slipped out of the limelight recently.

However, with the recent appointment of Boris Johnson as the new leader of the Conservative party and consequently, the new UK Prime Minister, Brexit has once again swung into focus.

Johnson Vows EU Exit By October 31st

A great deal of the support that Johnson garnered during his campaign was premised on his avowedly hard stance on Brexit. Johnson has promised to take the UK out of the EU by the current October 31st deadline, with or without a deal. As a result, the perceived likelihood of a no-deal Brexit has increased.

Test your strategy on how the GBP will fare! Open your Orbex Account and start trading now. 

Looking at the breakdown of the PM’s new cabinet, Johnson has mostly surrounded himself with Brexiteers from the official Vote Leave campaign. He has sacked many of May’s key cabinet members, mainly pragmatic conservative MPs, replacing them with staunchly pro-Brexit MPs.

No Deal

However, despite Brexiteers now being firmly in charge, Johnson still needs a no-deal Brexit to be approved by the house of commons, wherein lies the difficulty.

Johnson’s current working majority is just two, which poses severe questions to the credibility of his “do or die” threats regarding leaving the EU on October 31st. Indeed, many conservative members have said that they are prepared to rebel against the government in order to stop a no-deal Brexit.

In order for Johnson to succeed with a no-deal, he would need to persuade a large position of opposing MPs to back him. Given that May was unable to pass (what was deemed) an insufficient deal, it seems incredibly unlikely that Johnson will be able to pass a no deal Brexit.

Snap Election

One potential outcome is that we see a snap election this autumn in the UK. Johnson’s cabinet appointments, as well as his current “love bombing” campaign around the UK, suggest that this is a likely option.

However, such a move would be a clear risk for Johnson. This is especially true given the surge in support for both the Brexit party and the liberal democrats. Recent opinion polls show that labour and the conservatives have come under significant pressure recently. And the data reflects this! The four traditional parties are now all polling around 20%.

Consequently, it appears that the most likely outcome at this stage would be a hung parliament. This means no party is able to gain a majority.  However, if polling starts to look different on the back of the PM’s current “love bombing” campaign, then the prospect of a snap election could become more of a reality.

Johnson Deal Chances

One final scenario is that Johnson is able to get a deal through parliament. While both he and the EU have been clear about their red lines, Johnson’s popularity could help him succeed where May failed.

If parliament senses that Johnson’s willingness to leave without a deal is sincere, and if he has the capacity to achieve such an outcome, then we might see a late-stage compromise.

Technical Perspective

GBPUSD

GBPUSD remains under heavy selling pressure over recent days. The pair has moved lower within the bearish channel which has framed price action over recent months. This week, price has tested the 1.2115 low, where confluence with the bearish channel low has offered interim support. However, the tone remains heavy and a further break lower looks likely. Bears are eyeing a test of 1.1992 next. To the topside, any retest of the broken 1.2429 level is likely to find sellers, keeping any recovery shortlived.

START TRADING

or practice on DEMO ACCOUNT

Trading CFDs Involves high risk of loss