The British pound keeps being one of the most volatile assets in the foreign exchange market. In just a week, the GBP/USD shed over 250 points to 1.22 support. The sterling remains under pressure amid political uncertainty in the UK, which is only getting stronger as the fateful date of October 31 approaches, when the United Kingdom will have to leave the EU with or without a deal. The opposition parties are seriously considering launching an extremely rare impeachment process against British Prime Minister Boris Johnson. This possibility was discussed at the meeting of the opposition lawmakers last Thursday after the British Supreme Court ruled that Mr. Johnson's decision to suspend the Parliament for 5 weeks ahead of the Oct. 31 Brexit deadline had been unlawful.
The judiciary of one of the UK's highest courts of appeal, in fact, agreed with the Prime Minister's critics, who claimed from the very beginning that by this measure, Johnson tried to cut short lawmakers' time to challenge his Brexit plans before the deadline. The process would see the House of Commons first vote on an impeachment motion in the coming days. The last attempt to launch the impeachment process and persuade the House Commons to enforce it was in 1848 when it was suspected that Lord Palmerston, the country's foreign minister at that time and the future prime minister, had entered into a secret treaty with Russia.
In addition to the impeachment, the two largest opposition parties - the Labor Party and the Scottish People's Party (SNP), plan to initiate a vote of confidence in the Government, further supporting the investors' decision to stay away from "long" positions in the sterling and opting for safe-haven assets, such as the yen, franc and gold.
This week, events in England could heat up even more. On Monday, the Daily Telegraph reported that opposition leaders intend to force British Prime Minister Boris Johnson to ask the EU for a delay to Brexit. The House of Commons had already passed a law that legally obliges Johnson to ask for an extension until October 19, provided that until this moment, the Government fails to secure a new deal with Brussels.
The bottom line is that political events in England significantly increase the likelihood of even greater losses in the pound sterling. Market participants seriously consider the possibility of a hard exit, that is, without maintaining access to a single European market and the customs union. With this in mind, we recommend opening "short" positions in GBP/USD and GBP/JPY pairs. The value of potential profit will depend directly on how quickly you do this.