Key events in developed markets

British lawmakers will have to hit the ground running when they return to the House of Commons on Tuesday. MPs will have just five sitting days to put the wheels in motion to try and stop a ‘no deal’ exit on 31 October, before Parliament is suspended until 14 October.

There is talk that MPs may try to convene over the weekend of 7/8 September – something that has only happened a handful of times since World War II. Even so, the chances of a successful early strike by lawmakers seem low as things stand. Most MPs who are opposed to ‘no deal’ would prefer to legislate to force Prime Minister Boris Johnson to ask for another Article 50 extension. But the UK leader’s decision to suspend Parliament makes an already difficult task much harder, and press reports suggest the government is considering other radical measures to disrupt legislative efforts further if necessary.

If legislative attempts fail, opposition MPs may be left with little choice but to back a motion of no-confidence if they want to stop a ‘no deal’ Brexit. But given that the government is still officially targeting a deal with the EU, some lawmakers may be reluctant to back such a motion this early on. In the end though, if the government either fails to bring a revamped deal back from the EU, or cannot gain enough support from Parliament, then this route may ultimately gain traction among lawmakers. One thing looks increasingly assured – all of this may well go down to the wire in the final weeks of October.

The Canadian economy has been performing very well of late, rebounding from commodity and trade-related weakness in late 2018/early 2019. As such the Bank of Canada has so far not felt the need to follow the crowd of other central banks signalling dovish intentions. However, the latest escalation in trade tensions, plus the global slowdown and softening tone to US data suggests momentum may start to slow. The Canadian economy is relatively open and is dependent on commodities for a significant proportion of its output so we suspect the BoC may lay the groundwork for a potential rate cut in 4Q19.

In times gone by, the prospect of European Central Bank easing would see the Swedish Riksbank swiftly follow suit. But this time, things look different – in particular, the Swedish krona has weakened substantially, and according to our FX team, has further to run. That said, we could see the Riksbank lower its rate profile once again at next week’s meeting.

Global growth risks are mounting, while next year’s crucial wage negotiation round in early 2020 may end with a fairly subdued result. So while the Riksbank’s forecasts may still point to rate hikes in the future (albeit a little later), we think these are unlikely to materialise. That said, it also seems too early to be talking about rate cuts in Sweden.