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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Pound hits $1.30 amid Brexit deal and trade war hopes - as it happened

The City of London.
The City of London, where investors believe the chances of an orderly Brexit have risen Photograph: Niklas Halle’n/AFP via Getty Images

Pound steady as Brexit bill published

Late drama: the government has published the text of the European Union (Withdrawal Agreement) bill, ready for some titanic clashes in the Commons this week.

It’s online here.

Legislative experts are digging through it now.

Paul Waugh of HuffPost UK has spotted some key points - including some workers rights protection:

The BBC’s Faisal Islam has spotted a funny twist, which means EU law would linger on after Brexit....

Bloomberg’s Rob Hutton points out that MPs (and their hard-working staff) have a lot of reading to do, fast!

Our Politics Live blog has full reaction:

So, with the pound hovering around $1.2969, off this morning’s five-month high of $1.301, it’s time to shut up shop. Goodnight! GW

Could this be why the government isn’t keen to publish the likely economic impact of its Brexit deal?

As you can see, the work (by trade expert Sam Lowe of the Centre for European Reform) suggests a free trade deal would cause severe damage to some UK service sector exports -- particularly the City....

Updated

Over in parliament....

John McDonnell, the shadow chancellor, has blasted chancellor Sajid Javid for refusing to release an economic assessment of the new Brexit deal.

McDonnell says:

“Flying blind on a massive decision on the future of the economy is no way for a government to make recommendations to parliament or make legislation. It’s preposterous behaviour by the chancellor and this government.”

Here’s the full story:

Here’s our news story on John Bercow’s refusal to allow a Brexit deal vote today, which has helped push the pound down to $1.2966 in late trading.

Adam Seagrave, Head of Global Sales Trading at Saxo Bank, thinks there’s a 50:50 chance of Brexit happening by the 31 October deadline:

The Brexit situation is so fluid and market views are changing rapidly. GBP was initially a bit lower on Bercow’s rejection announcement but has since recovered most of that move.

The balance of probability is the passing of Johnson’s deal either with or without a delay which is what we have seen reflected in today and last week’s GBP price action. As it stands and in our opinion, the likelihood of the next event are as follows: Pass of withdrawal deal and amendments before 31st October (50%); Extension to January 31st deadline (25%) and General election including extension beyond 31st deadline (25%).

The FTSE 100 index of blue-chip shares had closed 13 points higher at 7,163.

That’s a modest move, with investors cautious as they wait for Brexit developments.

Back just below $1.30, sterling looks like a coiled spring, bursting to rise higher.

So says Chris Towner, Director at JCRA:

Boris Johnson’s plan to get his meaningful vote on his deal with the EU through parliament has been thwarted by House of Commons speaker Bercow. His reasoning was that it would be repetitive and disorderly to do so. However, he did say that there is every opportunity for the government to have its way by the end of October.

Sterling has been sold off from levels above 1.30 against the US dollar as Johnson’s plan to get Brexit done meets yet more obstacles. This frustration will weigh on Sterling but only to the extent that we have to wait for the timing of the inevitable vote. Sterling still looks like a compressed spring waiting for good news to lurch to another level higher.”

Over in Frankfurt, the Bank of England’s top economist is calling for more UK companies to report their gender pay gap.

Andy Haldane is arguing that current disclosure rules don’t cover enough companies to fix the problem.

My colleague Larry Elliott explains:

The UK government will need to insist that companies employing more than 30 people report their gender pay gaps if inroads are to be made into the persistent bias in wages and salaries, a senior Bank of England official has said.

Andy Haldane, Threadneedle Street’s chief economist, said only 40% of the private-sector workforce was covered by current legislation that obliges companies with more than 250 staff members to publish details of differences in pay between men and women doing identical jobs.

Speaking at a joint Bank of England and European Central Bank conference on gender and career progression in Frankfurt, Haldane said that although the gender pay gap had shrunk in recent years, it remained close to 10%.

To tackle the pay gap comprehensively,” Haldane said, “there is a strong case for extending the pay reporting regime to smaller companies – say, those with 30 or more staff.

Haldane also warned that little is being done to address ethnic pay gaps. More here:

Updated

City traders are taking Speaker Bercow’s ruling in their stride, says Naeem Aslam of Think Markets.

Sterling experienced a small movement towards the downside on the initial statement by the Speaker and the liquidity for the Sterling/dollar wasn’t moved much.....

This confirmed that traders are patient and there is no panic in the market because the extension is widely expected.

Updated

Pound drops back after Meaningful Vote rejected

Breaking: House of Commons speaker John Bercow has refused to allow a new meaningful vote on Boris Johnson’s Brexit deal.

He is citing a parliamentary rule that MPs cannot be asked to consider the same legislation twice in the same session.

This has knocked the pound a little lower, back to $1.298 -- it’s not a major surprise.

Bercow also explained that the government can instead table the legislation for a Withdrawal Agreement act, which could lead to crunch votes on Tuesday.

Our Politics Live blog has more details:

Here’s Sajid Javid’s letter:

Government: Brexit can't be measured with spreadsheets

The government is not releasing new economic forecasts of the impact of Boris Johnson’s Brexit deal.

The Treasury committee had asked chancellor Sajid Javid whether previous impact assessment had been updated, to cover the new deal agreed with Brussels.

Those existing assessments showed that a free trade agreement (FTA) would make the economy 4.9% smaller than staying in the EU, worse than Theresa May’s deal.

Javid has now replied, saying that the new deal is not comparable to that FTA scenario. But he’s not releasing any new figures.

Instead, Javid insists in a letter just published that agreeing the Withdrawal Agreement is “self-evidently in our economic interest”:

It would bring an end to the damaging uncertainty and delay of the past years, and allow businesses to get on with taking decisions, including around recruitment and investment.

He also points out that the details of the future free trade deal with the EU still need to be negotiated, so you can’t model them yet.

Javid adds that there’s more to Brexit than GDP...

My last point is to say that trust in democracy and bringing an end to the division that has characterised this debate over the past three years, is something that cannot be measured solely through spreadsheets or impact assessments, important though they are.

Respecting the referendum and closing this chapter so we can focus on delivering growth and the public services people deserve, is the right thing to do for our country.

Catherine McKinnell MP, Interim Chair of the Treasury Committee, is “deeply concerned” by this lack of detail.

She says:

The Chancellor has acknowledged that the Government’s previous economic analysis of a free trade agreement does not correspond to the agreement that the Government will now be seeking.

“The Government, therefore, appears content that MPs be expected to vote blindly on its new deal. The dearth of relevant economic analysis on which MPs can decide how to vote is deeply concerning.

The pound’s recent rally will have hurt speculators who have bet on a no-deal Brexit.

But Chris Turner and Petr Krpata of ING have spotted that the market is still substantially short on the pound -- meaning that investors are positioned for sterling to weaken.

They write:

Speculators are still short GBP and progress on Brexit legislation could see the pound rally to $1.32-$1.34. However, if new amendments head the way of a customs union, UK prime minister Boris Johnson’s fragile coalition and the GBP rally could fall apart.

Investors are ‘short’ the pound, despite recent Brexit progress
Investors are ‘short’ the pound, despite recent Brexit progress Photograph: ING

Trade war optimism, and hopes that a disorderly Brexit can be avoided, have lifted the US stock market.

The S&P 500 index has jumped 0.5% in early trading, gaining 15 points to 3,001.78.

Sterling is struggling to maintain its toehold over $1.30.

The pound has dropped back from this morning’s five-month high, back to $1.298, and remains volatile.

Traders are waiting to see whether the government will be allowed to hold a new Meaningful Vote on Boris Johnson’s deal, and whether any opposition MPs manage to amend it (which could lead to the vote being pulled).

Jefferies analyst Brad Bechtel explains:

Current thinking is that the Speaker will likely not allow the MV4 to happen given the motion was already put forward and in his mind sort of voted on in the form of the Letwin amendment. If that is the case, then Johnson shifts to implementation and puts forward a Withdrawal Agreement Bill or WAB.

The WAB would likely be attacked by remainers who will add things like a potential 2nd referendum or various other ‘wrecking’ clauses or amendments related to customs union. If the Speaker actually does move forward with MV4 then the focus will be the vote that was originally scheduled for Saturday.

Bechtel also believes that a disorderly Brexit is unlikely, which should support the pound.

In the end, there is still a roadmap to a Brexit with a deal on Oct 31, but it will be tricky. Odds of a no deal Brexit have diminished significantly. Given there was no deal voted for on Oct 19 the PM was forced to ask for an extension from the EU, so we’ll hear more about that as well today with some talking about a potential ‘flexible’ extension to Feb 2020.

Hard Brexit odds being reduced has GBP/USD well supported with a move up to 1.3000 in GBP/USD overnight.

We are likely in for more turbulence this week with all of the various jockeying and decisions to be made but in the end the odds of a hard Brexit are lower, so that will keep GBP elevated but volatility also well supported.

Donald Trump’s economic advisor, Larry Kudlow, has just bolstered today’s trade war optimism by saying “things look pretty good” right now.

Echoing the positive noises from China, Kudlow also hinted that the US could abandon plans to hike tariffs on Chinese imports in December, if negotiations make progress.

Updated

Why Brexit isn't the end (or the beginning of the end...)

Boris Johnson urged MPs to “get Brexit done” on Saturday, as he tried to win approval for his withdrawal agreement.

That could be an attractive pitch, more than three years after the EU referendum. But it ignores the fact that the current deal only covers Britain’s exit, not its eventual new relationship with the EU.

Rupert Thompson, head of research at City firm Kingswood, says this uncertainty is a reason for caution, despite the rally in sterling and UK equities in recent days.

We have not made any major adjustment to our portfolios in light of the continuing uncertainties and retain a somewhat cautious stance on UK equities. A Deal would very much just mark the end of the beginning rather than the beginning of the end.

The lack of clarity over the UK’s future trading relationships will surely remain a significant drag on UK growth for a long time yet, albeit less than before. That said, we have delayed reinvesting the proceeds from a European fund switch, parking the proceeds temporarily in sterling cash so as to benefit from any further rise in the pound.

Clare Foges, former speechwriter for David Cameron, has written in the Times today that many voters are surprised, and alarmed, to hear that leaving the EU wouldn’t be the end of the matter...

Updated

British Prime Minister Boris Johnson and Irish Prime Minister Leo Varadkar at the European Council summit last week.
British Prime Minister Boris Johnson and Irish Prime Minister Leo Varadkar at the European Council summit last week. Photograph: Olivier Hoslet/EPA

Boris Johnson got a pretty warm reception from fellow EU leaders last week.

There were plenty of smiles, chummy handshakes and banter with the UK PM after the new Brexit deal was agreed. That all bolstered Johnson’s argument that London and Brussels have made decisive progress, so MPs should do their bit and approve the deal.

But... Robin Bew of the Economist Intelligence Unit argues that the EU are mainly relieved that the question of Britain’s exit could soon be over (until the discussions about a post-Brexit trade deal begin...)

Hopes of a breakthrough in the US-China trade talks are also lifting markets today.

China’s CSI 300 index closed 0.3% higher today, and the US stock market is expected rise too.

Over the weekend, China’s top trade negotiator said Beijing and Washington were making progress in trade talks.

Associated Press has the details:

China’s state-run Xinhua News Agency reported that Vice Premier Liu He told a conference in the southern city of Nanchang that the most recent trade talks with the U.S. made “substantial progress.”

The negotiations were “building a foundation for signing a phased agreement,” it said.

U.S. President Donald Trump and his Chinese counterpart, Xi Jinping, agreed to hold off for now on imposing new tariffs while a deal is under discussion. Trump has said he hopes to sign a “Phase 1” agreement with Xi when the two meet at a summit next month in Chile.

After a edgy morning’s trading, the FTSE 100 is currently just 10 points higher at 7161, up 0.15%.

Domestic stocks are continuing to have a good day, with car sales firm Autotrader and turnaround group Melrose Industries among the risers.

Prudential is the top stock, after demerging its M&G division (fund management and UK insurance).

Several big multinational firms are among the top fallers, because a strong pound makes foreign earnings less valuable in sterling terms.

Consumer goods firms Unilever (Marmite, Domestos and Dove) and Reckitt Benckiser (Dettol, Durex, Nurafen) are both down over 1%.

FTSE 100 risers and fallers, October 21 2019
The top risers and fallers on the blue-chip FTSE 100 this morning. Photograph: Refinitiv

Medical devices maker Smith & Nephew is the biggest faller, after losing its CEO following a pay row. Namal Nawana had apparently sought more money - a US-style package - prompting S&N to even consider relocating itself to America to avoid City pay rules.

Nawana’s successor will hardly face poverty, though -- he’ll get an annual salary of £1.08m, as part of a pay package of up to £5.5m....

Updated

Sterling is still looking choppy, and has dropped back below the crucial $1.30 mark.

The City are poised for developments in Westminster, and hints about whether Brexit could happen in 10 days time, or be delayed.

The latest news is that Boris Johnson’s spokesman has said the government hopes to hold a new vote on its Brexit deal today. However, it would abandon a vote (assuming the Speaker allowed it) if MPs tried to add a customs union amendment.

Updated

Here’s a handy breakdown of the parliamentary arithmetic ahead of a Brexit vote on Tuesday, from my colleague Peter Walker:

Current projections put the vote at a dead heat. Johnson’s side is boosted by 20 former Tories who now sit as independents but are supportive, and various other independents such as Brexit-minded former Labour MPs including Ian Austin and Frank Field.

The key will be how many current Labour MPs the government can tempt over. On Saturday, six voted with the government against Oliver Letwin’s amendment to delay approval of Johnson’s deal – Kevin Barron, Ronnie Campbell, Jim Fitzpatrick, Caroline Flint, Kate Hoey and John Mann. They could all be expected to back the deal.

The question is whether any more Labour MPs, particularly from leave-backing constituencies, could follow. The signs are mixed. One possibility, Gloria de Piero, has said she will instead work to support a customs union amendment.

More here:

German economy may still be shrinking

Newsflash: Germany’s central bank fears that its economy has kept shrinking.

In its monthly report, the Bundesbank has predicted that German GDP may have contracted in the third quarter of 2019.

If so, that would mean Europe’s largest economy had contracted for two quarters in a row, the standard Western definition of a technical recession.

The Bundesbank fears that the recent slowdown across German exporters is now hurting its domestic economy.

It says:

Germany’s economic output could have shrunk again slightly in the third quarter of 2019.

The decisive factor here is the continued downturn in the export-oriented industry.”

Recent data have shown that Germany’s exports and manufacturing output both fell over the summer, driving down business confidence to the lowest since the eurozone debt crisis.

The Bundestag sees little hope of a turnaround:

“Early indicators currently provide few signs of a sustainable recovery in exports and a stabilisation of the industry.

“This raises the risk that the slowdown extends to a greater extent to more domestically oriented sectors.”

Bloomberg has also calculated that Boris Johnson could just have enough support for his deal.

Brexit voting intentions
Brexit voting intentions Photograph: Bloomberg TV

But what about Labour’s plan to amend the deal by adding a customs union and a second referendum to the Withdrawal Agreement Implementation Bill (WAIB) this week?

Bronwen Maddox of the Institute for Government believes this would cause “trouble for the prime minister”, speaking on Bloomberg TV this morning.

Such an amendment would force Johnson back to Brussels for fresh negotiations, as the WAIB would no longer match the WA agreed last week (for obvious reasons, the UK and EU have to approve the same Agreement).

The pound typically falls whenever a no-deal Brexit looks more likely, and rises when it doesn’t.

So, today’s small rally reflects relief that Johnson has sent a letter seeking an Article 50 extension, while still pressing on with Brexit votes this week.

But...sterling’s long-term prospects will depend on how the UK economy copes with this long period of Brexit uncertainty. Ranko Berich of Monex Europe points out that business investment growth will be crucial:

Julius Baer: Brexit deal chances are almost 50:50

Julius Baer, the Swiss private bank, reckons Boris Johnson has a nearly 50% chance of getting his deal through parliament

David Alexander Meier, of Julius Baer’s economic research team, argues that more MPs could be persuaded to back the government now that a disorderly Brexit on 31 October now looks less likely.

Saturday’s events were another blow to Johnson, but the deal on 31 October is not dead yet. Johnson plans a next meaningful vote on the deal already today and hopes to pass the legislation (Withdrawal Agreement Bill) this week.

Hefty debates are to be expected, as the sittings will offer the critics plenty of targets, with House Speaker Bercow once again having the potential to tip the scales by setting the agenda. The opposition could try to amend the legislation to prescribe a Customs Union with the EU or a public referendum on the deal. Meanwhile, the Scottish Nationalists are warming up for further court action against Johnson due to his unsigned letter.

This week could see further ups and downs for the pound sterling as the news unfolds. However, we believe that the chances for the deal to succeed have improved almost up to 50-50, as insurance for a delay has now been doubled-up.

In case of a deal later this week, Brexit would occur on 31 October, with the beginning of a transition period (all unchanged) until the end of 2020, and there would be plenty of new uncertainties as negotiations on the long-term trade regime take place.

Michael Brown, senior analyst at currency firm Caxton, predicts the pound could keep rising...

“Sterling has risen above the key $1.30 level this morning for the first time since May, as optimism that a Brexit deal will pass in the Commons continues to build. The numbers now appear to be present for a ‘meaningful vote’ on the new Brexit deal to succeed, however it remains unclear whether Speaker Bercow will permit such a vote to take place.

“Should a vote not take place, attention will shift towards tomorrow’s vote on the 2nd reading of the Withdrawal Agreement Bill – the legislation that implements the deal in the UK. Such a vote, if passed unamended, would pave the way towards an orderly Brexit, and should see the pound continue to press higher.”

Sterling is also stronger against other currencies, gaining 0.15% against the euro this morning to €1.163.

Sterling hits $1.30

NEWSFLASH: The pound just hit the $1.30 mark, as the City cling onto hopes that a disorderly Brexit can be avoided.

The pound vs the US dollar
The pound vs the US dollar Photograph: Refinitiv

Traders are reacting to this morning’s predictions that Johnson has enough parliamentary support for his Withdrawal Agreement, even though MPs declined to vote the deal through on Saturday.

Berenberg’s argument that an orderly Brexit is now a 75% chance has clearly found some support.

Shares in banks, housebuilders, and other UK-focused companies are also pushing higher too this morning.

AJ Bell investment director Russ Mould explains:

“There are now renewed hopes Prime Minister Boris Johnson can get his deal through today, although there are likely to be further twists in the Brexit saga no matter what happens in Westminster later.”

Updated

Little by little, the pound is nudging towards the $1.30 mark against the US dollar.

It’s not been that high since the middle of May, but speculation that MPs could approve Johnson’s deal this week is giving sterling a lift....

The pound is now trading at $1.299, having clawed back its earlier losses.

The Financial Times has estimated that Boris Johnson has got enough votes to get his Brexit deal through parliament, just...

FT analysis suggests Mr Johnson could now have a slender Commons majority of five for his Brexit deal.

If Mr Johnson wins the second reading vote, then Brexit is back on track. The prime minister would move a “programme motion”, which MPs would vote on, to railroad the withdrawal agreement bill through the Commons in record time.

If a combination of long sittings in the Commons and the House of Lords is not sufficient to enact the legislation by October 31, the EU could offer Mr Johnson a “technical extension” to Brexit — perhaps a matter of weeks — to complete the parliamentary process.

More here:

Brexit uncertainty is dampening the UK housing market, according to online estate agent Rightmove.

October is usually a strong month for house prices, after the summer holiday lull. But this year, prices only rose by 0.6% --the weakest since October 2008 (when the financial crisis was kicking off).

After a bumpy start, Sterling is continuing to creep back towards Friday’s five-month highs, after its earlier slide:

Neil Wilson of Markets.com says traders haven’t given up hopes of a Brexit deal being approved soon:

It’s a massive week for the pound and for Brexit. The PM suffered a setback on Saturday and was forced to send the dreaded letter to Brussels asking for an extension, but left it unsigned and sent another (signed) missive saying delay is disaster.

It looks like Boris Johnson will make another stab at winning parliamentary support for his Brexit deal. We need to see if Speaker John Bercow allows it – his record on frustrating Brexit is well known. Otherwise the government will bring forward implementation legislation quickly to drive through the bill in time so that a delay is not required. The government thinks it has the numbers for the deal in its raw form to pass.

Sterling remains vulnerable to significant price swings but has yet to make any real shift off the back of the weekend’s votes. Traders had anticipated a volatile open down under, but we’ve not really seen anything too drastic so far.

Our Politics Live blog has all the action from Westminster, as the government tries to persuade Commons speaker John Bercow to allow another Brexit vote today:

Despite jitteriness about another Brexit delay, most European stock markets have risen in early trading.

That reflects optimism that Britain will avoid crashing out of the EU eventually (see Berenberg’s forecasts).

European stock markets, October 21
European stock markets, October 21 Photograph: Refinitiv

The mid-cap FTSE 250 index has also risen - up 0.3% this morning. UK focused companies are among the risers, with Royal Mail gaining 2.2% and builders supply merchants Travis Perkins up 2%.

Charts: How the pound has reacted

The financial markets were closed during Saturday’s historic parliamentary session on Brexit, so investors are now reacting to events.

This chart shows how the pound fell sharply last night once trading resumed in Asia, dropping from nearly $1.30 to below $1.29. But it’s now staging a minor recovery.....

The pound vs the US dollar on 21 October
The pound vs the US dollar today Photograph: Refinitiv

This chart shows how the pound has strengthened in the last couple of weeks, as hope of a new Brexit deal have risen:

The pound vs the US dollar over the last year
The pound vs the US dollar over the last year Photograph: Refinitiv

Updated

France: Brexit could happen in 10 days

The ongoing Brexit deadlock is actually more damaging to Europe than a no-deal scenario, claims France’s European Affairs Minister.

Amelie de Montchalin told BFM TV this morning that the EU must not become “paralysed” by the ongoing uncertainty over Britain’s position.

“What is certain is that we need a ‘Yes’ or a ‘No’ before October 31. We need clarity. The worst of Brexit is the uncertainty.

“There cannot be a new delay without it being justified... Europe cannot be paralysed,” she added.

One of De Montchalin’s colleagues, junior economic minister Agnes Pannier-Runacher, argues that Britain could leave the EU on 31 October, despite having requested a delay.

Speaking to Sud-Radio, Pannier-Runacher said:

“One cannot rule out a Brexit within 10 day”

[thanks to Reuters for the quotes].

Britain’s FTSE 100 index has opened cautiously higher, up 16 points higher at 7167.

UK-focused stocks such as housebuilders and banks are among the top gainers, with Taylor Wimpey up 2% and Lloyds Banking Group up 1.2%.

That suggests City traders are optimistic that a no-deal Brexit will be avoided.

Updated

Berenberg: 75% chance of an orderly Brexit

Despite his setback on Saturday, Boris Johnson is now more likely to take Britain out of the EU with a deal.

So argues German bank Berenberg, which has just slashed the chances of a disorderly Brexit - and of Brexit being cancelled.

It now believes there is a 75% chance of an orderly Brexit, up from just 35% previously

Kallum Pickering, Berenberg’s senior economist, reckons Johnson now has enough support in parliament, for two reasons:

  • 1) Johnson has already succeeded where his predecessor Theresa May failed. The Eurosceptic wing of his party is now backing a deal for an orderly Brexit. With 322 to 306, the Saturday vote was already close.

  • 2) This vote closed the last legal loophole that might have led to a hard Brexit on 31 October. Some of those rebel Conservatives, independents and pro-Brexit Labour members of parliament who did not vote for Johnson on Saturday because they do not trust him may now be ready to support the new Brexit deal. Their priority is to rule out a hard Brexit, not to prevent an orderly Brexit. As a result, Johnson probably now has the numbers to pass his deal.

Pickering adds that there’s a 40% chance, in his view, that the UK parliament will not ratify Johnson’s Brexit deal before 31 October. That could lead to a general election, in which the Conservative Party could campaign on leaving the EU with this deal, rather than on a no-deal ticket.

As such, Berenberg has cut the chances of a hard Brexit from 35% to 10%, adding:

The residual risk could come into play if a) a surprise surge in support for Nigel Farage’s Brexit Party before or in an election were to force Johnson to disavow his own deal; or b) if the UK and EU fail to strike a deal on their future economic relations by the end of the transition period.

Berenberg has also cut the probability of no Brexit to 15% from 30%, suspecting that Johnson’s deal could beat Remain in any second referendum. That’s despite forecasts that Britain would grow faster within the EU.....

UK Brexit odds
UK Brexit odds Photograph: Berenberg

Updated

Introduction: Pound under pressure after weekend Brexit drama

Britain’s Prime Minister Boris Johnson smiling in the House of Commons in London on October 19, 2019, during a debate on the Brexit deal.
Britain’s Prime Minister Boris Johnson smiling in the House of Commons in London on October 19, 2019, during a debate on the Brexit deal. Photograph: Jessica Taylor/UK PARLIAMENT/AFP via Getty Images

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

After the drama of Brexit Super Saturday, City investors are facing a Murky Monday as they ponder whether, when, and how the UK will leave the European Union.

The pound is under pressure in early trading, falling back from a five-month high, after MPs forced Boris Johnson to (grudgingly) ask for a three-month extension to the 31 October deadline.

Rather than vote for his new deal, parliament decided to withhold support until they’ve had a chance to scrutinise full legislation on the withdrawal agreement.

Having nearly hit $1.30 on Friday night, sterling has shed nearly a cent this morning, dropping back to $1.287 as traders react to this latest uncertainty.

But that’s still 5% higher than two weeks ago, before London and Brussels surprisingly came up with the new deal. And it could easily rally today, if Johnson makes any progress towards driving Brexit through.

The government is pushing for a new Meaningful Vote today, which could show that Johnson has enough support to get his deal through. Another possibility is a vote on the Brexit legislation on Tuesday.

The path ahead remains complicated....

Brexit flowchart

... but some City economist argue that the risk of a no-deal Brexit has fallen.

As Elsa Lignos of Royal Bank of Canada writes:

The numbers are actually shaping up in the government’s favour.

The Letwin amendment has paved the way for more Tory rebels to back Johnson, and having been estimated at a few votes short on Saturday, most expect the govt will reach the magic 320 tomorrow....

She argues that the pound could rally further:

Though government ministers are trying to claim the risk of no deal has increased due to the Letwin amendment, bookies suggest it has done the opposite. We agree and think the kneejerk pound weakness will be bought into.

But with the opposition Labour Party trying to build alliance to push for a softer Brexit than Johnson’s free trade deal, there could be more volatility in the markets this week.

Also coming up

Germany’s central bankers publish their monthly report today, outlining their view of the economic outlook in the EU’s largest economy. Brexit, trade wars and the domestic slowdown may all feature, as Germany teeters on the brink of recession.

Andy Haldane, the Bank of England’s chief economist, is speaking at a conference on “Gender and Career Progression” in Frankfurt

The agenda

  • 11am BST: German Bundesbank publishes its monthly report
  • 4pm BST: Bank of England chief economist Andy Haldane gives a speech on diversity.

Updated

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