Johnson to try again with election push after MPs vote

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29 October 2019


Boris Johnson failed in his first attempt to call an early general election on Monday, although he has pledged to make a fresh bid for a December vote later today.

he House of Commons voted in favour of holding an election on 12th December yesterday evening, although the Prime Minister did, as expected, fall well short in garnering the two-thirds majority required. Instead he will publish a new bill on Tuesday that will only need a simple majority in the House of Commons in order to pass.

While he can of course count on support from his own Tory Party, he will need votes from opposition parties for it to pass, namely the SNP and DUP. It looks likely that the Lib Dems will vote with Johnson, particularly given their surge in the recent polls. The lack of support from Labour, almost all of which abstained from yesterday’s vote does, however, ensure that the passing of the motion is not guaranteed.

The pound has not yet reacted in any meaningful way to the news in the past couple of days. On the whole, markets generally tend to act badly to the prospect of early elections, but in this instance sterling may receive some support from the news. The possibility of a Tory majority government is growing, an eventuality that markets believe would all but ensure a smooth and orderly Brexit by the end of January.

EUR/USD in tight range ahead of FOMC meeting

EUR/USD was similarly rangebound on Monday, with little macroeconomic or political news on tap for investors to digest.

Monday’s event marking the passing of the baton from ECB President Mario Draghi to his successor Christine Lagarde was largely a ceremonial event. Draghi did speak on the topic of the Euro Area economy, although his comments were largely identical to the ones from last week’s Governing Council meeting.

Some US housing data out this afternoon will be the main economic releases of the day, although we don’t expect them to cause too much volatility in the markets. All attention will instead be on Wednesday evening Federal Reserve meeting, which should give us a decent indication as to whether or not US policymakers are planning a pause in the bank’s easing cycle. As our Chief Risk Officer Enrique Diaz mentioned yesterday, ‘we expect them to cut rates in line with market consensus, but communications should be on the hawkish side, as on balance risks to the outlook seem to have receded since the last meeting.’ Should the above prove correct, we may well see a bit of a US dollar strength in the back half of the week.