Brexit and U.S Politics – It Could Go Horribly Wrong for Boris and the Brexiteers

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The U.S Presidential Election looks to have delivered mixed results for Boris Johnson and the Brexiteers.

Just like across the U.S, the world awaits the outcome of the U.S Election.

Democrat Biden looks set to take the keys to the White House in the coming days or even weeks. That is assuming that a recount in Wyoming doesn’t cause a market shock. Trump would need to win Georgia, North Carolina, Pennsylvania, and either Wisconsin or Michigan to take a 2nd term.

Failure would make the incumbent the first U.S President since 1992 to lose a bid for a 2nd term.

While the global financial markets await the outcome of recounts and court decisions, the EU and Britain may also be keeping a close eye on proceedings.

That Special Relationship

Boris Johnson may be a little hot under the collar, with the Brexiteers likely to be strategizing in the event that Biden is in fact the victor.

The general consensus is that Biden is pro-EU and likely to take a hard line against the Brexiteers.

For the EU, this is critical in 11th-hour negotiations. Without Trump at the helm, there would be no threat of punitive tariffs in response to the EU’s strong-arming Britain.

This would also mean that a U.S – Britain trade agreement, which has been in the works, gets put on ice. It may even be put in deep freeze…

There is one saving grace from the U.S elections this week. Biden and the Democrats failed to deliver a Blue Wave.

Boris Johnson may have to ditch the Internal Market Bill to avoid ruffling Biden’s feathers from the get-go, however.

The EU will also take a much harder stance on the Withdrawal Bill that could leave Britain out in the cold if there is no compromise.

For the British government, allowing talks to drag out beyond the U.S Presidential Election may ultimately prove to be a grave error.

There are going to be few voters that will be willing to stomach any compromise with the EU. Imagine the EU enjoying unaltered access to UK fisheries. What a turnaround of events that would be.

Such an eventuality should bring an end to Boris Johnson’s political career. An end that he would not be able to come back from.

The Establishment

In Brussels, the EU Commission President will be eagerly anticipating a Joe Biden victory. Since the rise of populous governments across the EU, the threat of other member states departing continues to linger.

A Joe Biden victory would likely delay or bring to an end any near-term ambitions for the likes of Italy to go it alone.

Italy is not alone, there’s also Spain, Portugal, the Netherlands, and Austria. Much will depend on the next round of elections.

COVID-19 and the economic devastation across a number of EU member states have not helped. The unwillingness of certain EU member states to accommodate those more affected will be a sore point.

For voters across Italy and Spain, and beyond, there will be question marks over the benefits of being a part of the EU.

How Britain progresses in trade negotiations with the EU and beyond will certainly be watched closely.

Biden or Trump?

An EU friendly president will give the electorate and even the more left-wing governments some food for thought.

So, while the global equity markets have been on the move, another choppy 4-years could be on the horizon.

It will all hinge on the outcome of the 2020 U.S Presidential Election.

For the British PM, a rebellion in the ranks will be inevitable if both sides agree to uphold the withdrawal Agreement.

The Pound

At the time of writing, the Pound was up by 0.27% to $1.30195. The upward move came off the back of the BoE leaving interest rates unchanged earlier this morning.

In the days ahead, however, we can expect volatility to pick up.

The UK economy is under pressure as a result of the 2nd wave of the COVID-19 pandemic.

For this reason, the UK will need to avoid additional economic hurdles including a no-deal Brexit.

We should therefore see the Pound respond to any updates from the U.S Presidential Election. Once there is clarity on who will take the keys to the Oval Office, the markets can then begin to consider what lies ahead on the Brexit front.

If Boris Johnson were to take a page out of Trump’s book, calling an immediate end to negotiations would force the EU’s hand before any clarity from the U.S.

Such a move may be too big a gamble, however, as it would alienate a Biden Administration…

GBP/USD 05/11/20 Daily Chart