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Pound plunges as parliament prorogued

GBP - British Pound

The pound was dumped yesterday as UK Prime Minister, Boris Johnson caught the markets off guard and announced an end to the current parliamentary session. As protocol dictates, the Queen accepted Johnson's request to prorogue parliament meaning it will shut its doors sometime between the 9th and 12th of September and return with the State Opening due on the 14th October, only 17 days before the Halloween deadline for the UK to leave the EU.

Although many had aired the idea of Johnson finishing the current two year session, the dramatic announcement saw GBP/USD plunge from close to 1.23 down to a low of 1.2155 in around 45 minutes. GBP/EUR slipped from around 1.1080 to close to 1.0950 in the same time frame before the pound rallied and recouped some of the losses.

The shutdown limits the amount of time opponents to a no-deal Brexit have to block the move with many, including former PM John Major being highly critical of the move however it was seen as a masterstroke by many Brexiteers. It appears Johnson is looking to force the hand of the EU in an effort to force them to budge on the contentious Irish backstop that has been the major stumbling block in negotiations since the withdrawal agreement was announced at the end of last year. There has already been legal action undertaken to stop the move and expect MPs opposed to Brexit to try and force Johnson from power with a no confidence vote.

GBP/USD is just under 1.22 with GBP/EUR around the 1.10 handle. After a relatively quiet summer, Brexit is back with a bang!

Key Movers

Away from the turmoil of Brexit, the China/US trade impasse rumbles on unabated. There has been no fresh developments on the issue so the markets perceive no news as good news this morning with USD/JPY back above 106 and the Aussie and Kiwi rallying against the greenback (albeit from a pretty low base) despite some pretty soggy domestic data overnight.

Australia's closely watched Private Capital Expenditure q/q printed -0.5% when 0.4% was eyed. New Zealand's monthly ANZ Business Confidence Survey dropped to -52.3 its lowest reading in over ten years with the headline saying it all "Nothing good to say about it."

Today's data sees the second reading of Q2 US GDP with a slight downward revision to 2% from 2.1% expected. Tomorrow's main event is Eurozone CPI first estimate for August with a hold at 1% penciled in. EUR/USD trades at 1.1080.

Expected Ranges

GBP/USD: 1.21 - 1.2280 ▼

GBP/EUR: 1.09 - 1.11 ▼

GBP/AUD: 1.8005 - 1.8230 ▼

GBP/NZD: 1.9180 - 1.9350 ▼

GBP/CAD: 1.6155 - 1.6290 ▼