Brexit Bulletin: They Think It’s All Over

Days to General Election: 8

(Bloomberg) --

What’s Happening? With more than a week left in the U.K. election campaign, the markets are already pretty confident of the result.

The pound soared on Wednesday, climbing nearly 1% against the dollar and rallying to its highest level since 2017 against the euro, as traders upped their bets that voters will back Boris Johnson and deliver a decisive Conservative majority that can push through his Brexit deal.

The latest wave of optimism came as polls showed the ruling Tories holding their lead over Jeremy Corbyn’s Labour Party, and as Johnson dodged the potential booby trap of a visit from an outspoken U.S. president by doing a whole press conference at the NATO summit without mentioning his U.S. counterpart by name. Trump himself decided to avoid the press conference entirely.

Pound bulls prefer the Conservatives both for the prospect of moving on to the next stage of Brexit talks and for their market-friendly policies, in contrast to the Labour leader’s pledges to nationalize industries and overhaul the economy. Royal Bank of Canada says it sees a 60% chance of a Conservative majority next week, leading to the “near certainty” of Brexit at the end of January on the terms of Johnson’s deal. Under a Labour-led coalition, meanwhile, “almost all roads lead to a second referendum, to which we would apply a 60/40 probability of a vote to remain,” according to Adam Cole, RBC’s chief currency strategist.

Some traders are protecting themselves just in case things go sour next week, but overall the polling failures of both the Brexit vote and the 2017 election seem to be fading from the market’s memory.

Today’s Must-Reads

• The election has revived a political and economic debate that many considered to have been won decades ago—whether nationalization works.
• The Sun spent a day on the campaign trail with Boris Johnson, and found his 16-hour days are fueled by porridge, flapjacks and endless cups of coffee.
• Labour’s shadow Chancellor John McDonnell made a major speech on the economy in Birmingham today, in which he said his party’s policies could save families more than £6,700 a year. That claim was the subject of Bloomberg Westminster’s podcast on Wednesday.

Brexit in Brief

Services Slump | The U.K.’s dominant services sector was the weakest since March last month as new work dried up under a cloud of political uncertainty. IHS Markit said the reading, coupled with previous reports on manufacturing and construction, is consistent with a 0.1% quarterly contraction in the economy as a whole.

Major Warning | Former prime minister John Major turned his ire on his fellow Conservatives, telling an event in Switzerland that Brexit is the worst foreign policy decision ever, and that Johnson’s deal is flimsy and shabby.

Lack of Endorsement | The New Statesman has “resolved to endorse no party at this general election,” instead urging its readers to “vote, tactically if necessary, to deprive Mr Johnson’s hard Brexit Conservatives of a majority.”

Greater Oversight | The European Central Bank has started supervising some of the world’s top banks’ businesses in the region, as they build up their operations across the European Union ahead of Brexit.

In Defence of the BBC | Writing in the Guardian, the BBC’s director of news and current affairs Fran Unsworth defends the corporation’s coverage of the election, which has come under fire from some quarters.

Want to keep up with Brexit?

You can follow us @Brexit on Twitter, and listen to Bloomberg Westminster every weekday.

To contact the editor responsible for this story: Caitlin Morrison at cmorrison59@bloomberg.net

©2019 Bloomberg L.P.