Looks like a game of chicken
The EU flatly refused to renegotiate the withdrawal agreement -- as they long promised -- and now Boris Johnson's government has engaged them in a game of chicken.
Gove said the government is now operating on the assumption of a no-deal Brexit and Raab said they are 'turbo-charging' no-deal preparations and that the EU must change its 'stubborn' position. Johnson's spokesman said he hopes EU leaders will change their minds.
So who blinks first? The EU is somewhat secure in knowing that parliament will never allow a no-deal Brexit and I don't think they have any love for Johnson. At the same time, the EU has folded under pressure before.
For the moment, however, it's cable longs that are folding. The pound is down 87 pips to start the week and has broken 1.2300 to a fresh 28-month low.
The technicals don't offer any reason for optimism. There are some oversold short-term indications but little support until 1.2000.
