Sterling hit by headlines that PM Johnson is.....>

UK: Sterling hit by headlines that PM Johnson is seeking to write into law that

the 'transition period', in which the UK will be out of the EU but in the

customs union and single market while a FTA is negotiated, cannot be extended

beyond end-2020, raising fears of a no-deal Brexit. 

- There are a number of reasons for scepticism surrounding the prospect of the

UK's future relationship with the EU being based on WTO terms:

-- With an 80-seat majority in the Commons, Johnson is not beholden to the

hard-Brexit ERG group within his Conservative party any more. Johnson, a man not

inclined towards a no-deal Brexit, will be able to rely on party loyalty,

especially from new MPs, to ensure that any attempted extension passes. 

-- The law can always be changed. Should the prospect of a no-deal Brexit appear

to be looming in mid-to-end 2020, the PM can simply amend the law in the Commons

by gaining a majority for it.

-- The gov't could sign up to a thin FTA in 2020 that is fleshed-out over the

course of the coming years. This avoids the need to officially extend transition

period, but avoids WTO trading relations at end-2020.