That's a really good question, yet it's one which we still don't know the answer to. However, the pound was sold heavily yesterday on news that Brexit negotiations had stalled with apparently little hope of a deal being agreed ahead of next week’s EU summit. This followed a reported conversation between Boris Johnson and Angela Merkel with the German chancellor apparently stating that Northern Ireland must remain in the EU customs union in order to avoid a hard border and secure an agreement.
If a resolution is not found by the end of the EU Summit on Friday 18th we then look to the PM to submit the request for another Brexit delay by the 19th. The UK government have confirmed that the letter will be sent, and expectations are that all 27 EU members will agree to the extension.
There is, however, still the insistence from number 10 that we will be leaving with or without a deal on the 31st. The question is, will the current UK government actually let the UK crash out of Europe at the end of the month?
The reality is that the continued threat of a hard exit is probably the only thing keeping talks with the EU alive, and with a slim possibility of progress we would not expect the PM’s stance to change at this critical stage. Although not completely off the table, when we get close to the point of no return you would hope common sense prevails or that legal/parliamentary intervention will prevent this outcome.
In the event of a no deal exit, the pound would obviously come under substantial pressure. If the extension is granted we would expect sterling to strengthen, (all be it into a period of continued uncertainty) as we move towards a general election.
In the event of a general election, with parliament and the country so divided, it’s difficult at this stage to see if any party will be able to secure a majority.
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