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Opinions Joost Derks

This is how Brexit is getting closer little by little

24 October 2019 - Joost Derks

Can you give a good judgment within 48 hours on more than 100 pages of legal jargon, which will also determine the future of your country? Neither does the British House of Commons. That means that the new Brexit delay does not come as a surprise. However, the long-term outlook is slowly improving.

British Prime Minister Boris Johnson will not succeed in leading Britain out of the European Union on Thursday 31 October. A majority in the British House of Commons voted against the timetable he had in mind on Tuesday, October 22. There was then a lot of attention for this defeat, so that you would almost forget that he managed to get his agreement through the House of Commons before. With this he has brought a departure from the European Union within 3 months closer than his predecessor Theresa May in the 3 years before. The question is, however, whether he will also succeed in actually bringing the Brexit soap to a successful conclusion.

Deadline backwards
The good news is that it looks like Prime Minister Johnson will have plenty of time for that. The European Union is committed to a postponement until Friday 31 January. Johnson would prefer to keep the pressure on and bet on a delay of only a few weeks. He threatened to call new elections if they were postponed until early next year. However, there are several reasons why he may not want to do that. First, his Conservative Party is in danger of facing competition from Nigel Farage's Brexit Party. In addition, politicians are usually reluctant to hold elections in the winter months, and certainly not in the festive month of December.

By the way, Johnson needs support from the opposition Labor party to call early elections. Despite the promises, it remains to be seen whether he will receive it. It is not without reason that the betting shops are pricing the chance of elections before the end of the year significantly smaller than in 2020. The British pound in any case indicates that a deal is not possible in the short term. The currency appreciated more than 2% against the euro 3 weeks ago when Prime Minister Johnson suddenly made good progress in talks over the Irish border. Despite the deal and boost in the House of Commons, only 1% has been added since then.

take a breath
A moment of rest may now arise in the brexit roller coaster, in which Johnson gauges where his opportunities lie. This while the parliamentarians struggle through the 110-page legal text of the bill. All in all, the Brexit world is looking a bit better than it was a few weeks ago. The no-deal Brexit that Johnson threatened has been canceled and the House of Commons proves that it does not vote down every departure agreement. The European Union is also prepared to give the British even more time. It is possible that Brexit will eventually come. But before that happens, the patience of the financial world will be put to the test.

Joost Derks

Joost Derks is a currency specialist at iBanFirst. He has over twenty years of experience in the currency world. This column reflects his personal opinion and is not intended as professional (investment) advice.

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