Boris Johnson Brexit Strategy Shifts Pound-Euro Parity Odds
The Pound could be heading for value parity with the Euro before the end of 2019 after a disastrous first week for the British currency with Boris Johnson in charge.
Mr Johnson replaced Theresa May as the British prime minister last week and set about reshuffling his cabinet with hardline Brexiteers.
His insistence on keeping a No Deal Brexit on the table was backed up by his chief No Deal strategist Michael Gove, who is making contingency plans in case Britain does leave the EU on October 31 without an agreement in place.
But the tough talk from Johnson and Gove has not convinced the markets that all will be well come Halloween.
Sterling Takes Fresh Hit
Sterling crashed to a fresh two-year low of $1.2120 against the dollar this week, while its value with the Euro fell to €1.0881. Traders are worried a No Deal Brexit could badly hit the UK economy, making the Pound a less attractive currency.
And bookmakers Paddy Power have slashed their price on Sterling/Euro parity before the end of the year in response to the market changes.
Blimey. Look at this chart of sterling vs euro over the past month. The pound is now at the weakest level for two years (vs US$ it's lowest level in 2.5yrs) pic.twitter.com/fgIDWro20E
— Ed Conway (@EdConwaySky) July 29, 2019
In February the risk of the Pound sliding to the Euro’s value was 4/1 with the bookmaker. That crashed to 13/8 on Tuesday after Gove said No Deal was now the “assumed” position of the government.
By Wednesday morning the odds had fallen even further, to 5/4.
Amazingly, back in 2000, Sterling was worth 1.73 Euros. It has gradually slid since the UK voted for Brexit in the summer of 2016.
Confusion In The Cabinet
Since Gove’s statement on the likelihood of No Deal, the PM has had to reel back on the message, claiming he is still fighting for a deal with the EU.
But the noises coming from the Conservative leader are not quite in harmony.
Mr Johnson wants to renegotiate the EU withdrawal deal Theresa May failed to pass through Parliament three times. But the EU insist the new prime minister must offer something different to what was already agreed, while Johnson says it’s the EU who must come to the table.
The stare-off has resulted in Johnson threatening the EU with responsibility over No Deal, telling voters in Wales: “This is very much up to our friends and partners across the channel”.
Johnson, meanwhile, revealed a £500m plan for farmers in the case of a No Deal Brexit, suggesting he is trying to have both ways of the debate.
