As Europe debated the length of the EU extension yesterday, with the French still firmly insisting on a shorter extension to the Brexit process; back in the UK, the Government pushed for a snap election on December 12th in exchange for debating time on the withdrawal bill.
Typically, as with any pre-election chatter, the pound duly shed 0.50% on the EUR to 1.1552 and 0.65% on the dollar to 1.2840 as some traders lost their nerve. The market will now have to monitor Parliament to see who blinks first, the Conservatives, or the many opposition parties who know an election could make or break their Brexit position.
As mentioned yesterday, the EU is still holding talks on how long the extension will be – depending on what kind of timeline is offered, Westminster will react accordingly.
A short French-style delay until mid-November will play into both the Government and the pound’s hands, as it will comply with the Benn Act ensuring the UK asks for an extension, whilst also highlighting the small amount of time to pass a bill and avoid no-deal.
A longer, and widely expected, Irish-style three-month delay would also comply with the Benn Act, but then leave the door open for an election in the meantime, on which the future of Brexit would be fought.
Despite the above avenues being the most likely in the short term, a possible third option also exists, one that is quite unlike any experienced in Parliamentary history: the Government pausing all bills, budgets and business essentially paralysing itself to force an election.
Don’t forget, that the Government needs at least 2/3 of Parliament to back an election call. If the opposition continually refuses to do so, the Government will effectively go on strike, offering a zombie-like Westminster until someone blinks.
Which, admittedly, is very fitting with Halloween just around the corner.
Have a great weekend,