Sterling falls as Boris Johnson restricts parliamentary time and makes a no-deal Brexit more likely - CNBC

Boris Johnson speaks after being announced as Britain's next Prime Minister at The Queen Elizabeth II centre in London, Britain July 23, 2019.

Toby Melville | Reuters

Sterling fell 1% against the dollar Wednesday morning after U.K. Prime Minister Boris Johnson said he would schedule the formal reopening of parliament for October 14 — a highly-controversial move that would restrict parliamentary time before the Brexit deadline and increase the chances of the U.K. leaving the EU with no deal.

After initial reports, Johnson confirmed in a speech that parliament would be suspended days after Members of Parliament (MPs) return from their summer recess and would return only for the queen to deliver a speech outlining the government's post-Brexit plans on October 14.

This speech is the formal reopening of parliament and the October 14 date would mean that parliamentary business would be delayed, restricting time before the October 31 Brexit deadline. Opposition parties on Tuesday signaled intent to unite in creating a law to block Johnson from forcing a no-deal Brexit, which could damage Britain's economy, according to several projections, and has faced widespread opposition in the House of Commons.

Therefore, Johnson's move Wednesday is seen as an attempt by the government to stifle the creation of this law and force through Brexit with or without a deal, one of the U.K. leader's key promises upon taking power.

However, Johnson said in his speech Wednesday that lawmakers will still have ample time to debate Brexit and it was untrue that he is trying to sideline parliament on the issue.

Parliament returns next week and will sit until September 9, at which point MPs would typically go on recess for three weeks during a season of political party conferences. Johnson's move effectively extends the recess, through declaring a queen's speech, to five weeks.

A queen's speech, a norm when a new government takes power in Britain, also requires five days of debate afterwards. This makes it harder for MPs to use legislation as there would not be any room on the parliamentary schedule until this would complete.

Johnson is seeking to strike a renewed agreement with Brussels before the deadline, but the two sides have clashed over the Irish "backstop" issue, intended to maintain a seamless border on the island of Ireland.

Widespread disapproval

Opposing party leaders and MPs have voiced widespread disapproval with the move. Scottish National Party leader and First Minister of Scotland, Nicola Sturgeon urged colleagues to try to thwart Johnson.

Tom Watson, deputy leader of the main opposition Labour party, called the suspension a "scandalous affront" to democracy.

Tom Brake, Brexit spokesperson for the pro-EU Liberal Democrat party, called it a "declaration of war."

Jordan Rochester, FX Strategist at Nomura, said in a note that while the suspension is not "as bad" as proroguing parliament completely, it has reduced the time MPs thought they had in October to block a no-deal exit.

"For GBP to recover the fall this morning rebel anti-no deal MPs will have to get their acts together in the first weeks of September. No more delaying," the note added.

Rochester added that the fall in GBP is unlikely to extend into a new trend as "parliament is not completely prorogued just has to bring forward their plans to stop a no deal to next week," and said the market is already betting heavily against the currency.

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https://www.cnbc.com/2019/08/28/brexit-pound-falls-on-reports-uk-government-wants-to-suspend-parliament.html

2019-08-28 09:43:23Z
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