Make a plan for every outcome, including… God forbid… more of the same.

ref: - "HSBC Says British Pound May Soar. Or Crash”, Bloomberg Markets 19/11/19

Regulars will know that as a rule we've tried to avoid the subject of Brexit like the plague, as much as anything else on the grounds that whatever one's point of view on the matter it's just too sad to watch a nation and a parliamentary system tearing itself apart. Of course, we've also steered clear of it all because it seemed pretty obvious from the start that nothing would be decided until the very last moment and therefore suggesting the likely outcome, both for the markets and for the political arena, would be a mug's game. On top of which, and this is very unprofessional, it quickly became excruciatingly dull.

As it happens, here we are a very long time after the original "very last moment" and guess what? When it comes to identifying the most likely of a range of diametrically antithetical possible outcomes, we are no better off than we were almost 3 ½ years ago when the British public last made fools of the pollsters and of the ruling Conservative party leadership of the time to vote "Leave" in the referendum. In fact, arguably those possible outcomes are even more binary now that PM Boris Johnson has called a general election, gambling on getting a parliamentary majority for a Conservative party shorn of the doubters and committed to his own Brexit position.

Yesterday David Bloom, global head of HSBC's foreign-exchange strategy, told Bloomberg that even now anything could happen, with implications for the British Pound ranging from disastrous, through moderately bad to extremely supportive.

We should probably remind you that Mr Bloom gave his views before the first TV debate between Mr Johnson and Labour party leader Jeremy Corbyn last night. Not that it has much relevance, mind you … despite all the attempts of the media to "big" it up, this was a predictable no-score draw and one that was pretty painful to watch (by all accounts!). When these live, pre-election TV debates were first introduced they were hailed (at least by the media that was staging them) as a great advance for the democratic process. Really???

We're not at all sure that the often distressingly low standard of debate and the surrounding hoopla that often looks like it's been imported from the Jerry Springer studio next door doesn't have precisely the opposite effect. But that's a discussion for somewhere else…

So back to the level of UK Sterling, which has been the best performer of G10 currencies over the last quarter by some distance. That's not totally surprising… whether on the upside or the downside, the very nature of the Brexit shenanigans has meant that the British Pound is very often the biggest mover in either direction. Although off a touch this morning, this quarter it is up over 5% against the Dollar and nearly 4% against the Euro, all on the back of an increasing belief that we will see some kind of Brexit resolution at the end of all this. Mr Bloom reckons that the prospect of EITHER rubber-stamping Boris' current deal proposal (Conservative win), OR a new referendum (Labour win) will, in their different ways, put an end to the politicking and bring some certainty to the piece.

Mmm… that MAY be the immediate effect but we're not totally convinced that a new referendum is bound to lead to a UK standing four-square behind one course of action whichever one is chosen. It's unlikely, in fact. But the most popular view is that 1.) a Conservative majority would be the best outcome for Sterling "as it would enable Johnson to push through his deal in time for the Jan 31st deadline and move forward with negotiating a new trade deal with the EU". 2.) a Labour win on a manifesto of huge rises in public spending, widespread nationalisation and tax hikes for the rich that might engender capital flight would naturally damage the Pound, and 3.) a hung parliament with no majority for either of the main parties would be the absolute worst-case scenario… then the UK really would be back in the mire and "lost in the wilderness"… back to square one, as they say.

Okay, that's all very well but put some numbers on it. Mr Bloom obliges with his best-case scenario bringing the possibility of UK£ / US$ at $1.45, and worst could see it down to $1.10.

Yep, that's pretty binary… and a little bit frightening.

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