Pound Off Highs as PM Johnson Seeks Support for Brexit Plan Ahead of Vote

By Yasin Ebrahim

Investing.com – The pound eased from session highs Monday as Prime Minister Boris Johnson continued to make a case for a controversial bill that threatens to scupper the prospect of a post-Brexit deal with the European Union ahead of a vote later today.

GBP/USD rose 0.52% to $1.2858down from a session high of $1.2919.

Ahead of a first parliamentary vote on The Internal Markets Bill at 22:00 GMT today, Boris Johnson suggested the legislation was needed to avoid a situation in which “our EU counterparts seriously believe they have the power to break up our country.”

The bill, published last week, seeks to create common rules that apply across the whole of the U.K. including England, Northern Ireland, Scotland and Wales. It would likely clash with key terms of the withdrawal agreement requiring that Northern Ireland, in the post-Brexit period, follow EU rules in order to avoid a hard border with the Republic of Ireland.

The legislation is expected to pass the first parliamentary process despite the several members from Johnson’s Conservative party refusing to tow the party line and back the bill.

The vote comes just days after European leaders threatened to abandon a U.K.-EU trade deal if the prime minister moved ahead with the legislation.

The pound’s move higher could prove to be short-lived ahead of Bank of England’s meeting later this week.

Experts have suggested the central bank could renew its cautious outlook on the economy, and lay out the welcome mat for more easing in November.

“If recent communication is any guide, the central bank will signal that QE remains the marginal tool of choice which should translate into a small downward move in gilt yields, likely to be drowned out by day-to-day Brexit noise,” ING said in a note. “In short, the debate on further monetary easing is adding downward risk to a very shallow recovery in GBP interest rates.”