What happened?

Never a dull moment in UK politics. The EU finally granted the UK a Brexit extension to January 31, with the option to exit December 1 or January 1 if the Withdrawal Agreement Bill is ratified earlier. January 31 is the most likely date for Brexit.

UK Prime Minister Johnson pulled progress on the Withdrawal Agreement Bill from Parliament, presumably until after the election.

After three failed attempts for an election, Johnson’s fourth attempt was the charm. The UK looks headed for a pre-Brexit general election on December 12. Johnson’s election bill passed the House of Commons 438 to 20. It still needs to go to the House of Lords before getting Royal Assent on Thursday, but no road bumps are expected.

How did the market react?

Despite the extension and election news, the pound (GBP) has only strengthened by less than 0.50% versus the US dollar so far this week. However, the GBP is nearly 8% stronger versus the dollar from the lows in early September. This suggests a lot of optimism was already priced into the currency going into this week’s news. However, an election does not come without its own uncertainty, so the relative stability in GBP may not last long.

Right or wrong, dealers have been busy revising their Brexit calls toward an orderly exit and raising GBP forecasts.

What to watch

Let the campaigning begin. Parliament will most likely be dissolved on November 6 for the campaign period. The election is set for December 12.