Pound Tumbles On Report PM Johnson Plans To Outlaw Further Brexit Delays

Just three days after the biggest one-day surge in cable since 2016 following the crushing Conservative defeat of Labour, the pound has lost all post-election gains, plunging more than 1% on Tuesday...

... on overnight news that U.K. PM Johnson intends to change the law to guarantee that the transition phase on Brexit is not extended beyond the end of 2020. As ITV's Peston tweeted, Johnson is to change the Withdrawal Agreement Bill to put into law that transition arrangements with EU, during which UK is in effect non-voting member of EU, must end 31 Dec 2020, which he noted will be seen as increasing the risk of delayed no-deal Brexit.

The news, which was repeated by a number of media outlets, would be a jolt to those who believed that the PM will use his big majority to transition to a softer relationship with the EU, as DB notes. This will raise the stakes for negotiators on both sides to conclude a trade deal. However the EU have repeatedly made it clear that a comprehensive agreement is likely to take years.

UBS chief economist Paul Donovan offered aslightly less draconian take :

UK Prime Minister Johnson is vowing to make the interminably tedious Brexit process terminable. Final exit by the end of 2020 will be put in law. Sterling fell in response. Is this really the end? No. The government can change laws if it wants. If the UK does leave on schedule, there will still have to be post-exit negotiations.

In any case, the probability of a harder bare bones deal or a cliff edge Brexit in 12 months time has gone up this morning, in the process crushing all those cable bulls who went all in the British currency in the past few days now that so many experts predicted the pair would hit 1.40 in the coming days. Oops.