Tory Candidates To Back Johnson’s Brexit Deal
GBP has been trading higher this week. Optimism around Brexit has helped lift the exchange rate against both USD and EUR.
This fresh wave of optimism comes on the back of news that all 634 Conservative part candidates will back the PM’s Brexit deal if they win in the December elections. This display of unity has increased the perception that a Brexit deal is the most likely outcome of the general elections.
Latest UK Elections Polls
The latest polls show that the race is between the Conservative party and the Labour party, as was expected.
In the poll of polls, conducted by PA media, the Tories came in at 42% while Labour, at 29%, are now 13% behind them.
The two parties are staunchly divided over the Brexit issue. In fact, Labour maintains that, should it come to power, it would hold a second referendum.
However, polls show that the Conservative party is opening up its lead over Labour. This supports the view that the Conservatives will win and push ahead with Johnson’s deal. However, this optimism might be misplaced!
A Conservative win also raises the risk of a no-deal scenario if the government fails to receive backing in parliament.
The UK PM announced this week that he will cancel the planned corporation tax cuts and use the money to keep the NHS funded. Johnson was planning to further reduce the corporation tax from 19% to 17% as of April 1st, 2020.
The move is a clear tactic to try and assuage the concerns of many that a Conservative government would result in further tax cuts for companies along with the potential privatization of the NHS.
CBI Warns Over Brexit
Johnson made the announcement at the CBI conference this week where business leaders warned over the damaging impact from ongoing Brexit uncertainty.
The CBI is mainly concerned with the lingering risks of a no-deal Brexit and what the potential fallout could be. The CBI said:
“While the UK’s preparations to date are welcome, the unprecedented nature of Brexit means some aspects cannot be mitigated…And although businesses have already spent billions on contingency planning for no deal, they remain hampered by unclear advice, timelines, cost and complexity… Larger companies, particularly those in regulated areas such as financial services, have well-thought-through contingency plans in place, though smaller firms are less well prepared.”
The remarks from the CBI come after those of Michael Gove. The government minister responsible for planning for a no-deal Brexit wrote in a UK newspaper column over the weekend:
“No deal is now a very real prospect.”
Despite the risks, for now, it seems the market is optimistic that a deal is coming up. This is keeping GBP supported in the near term. GBPUSD is currently capped by the 1.3019 resistance level after breaking above the bearish trend line from year to date highs.
Price has been holding in a consolidation pattern over recent weeks. However, it remains well supported on dips. For now, focus remains on a further move higher. The 1.3299 level is the next area to watch above 1.3019.
Should we see any move to the downside from here, the retest of the bearish trend line will be the first zone to watch ahead of a test of the 1.2479 level.