No confidence vote and early UK elections still most likely scenario, ING says

Indeed, the Dutch broker believed Boris Johnson's intention was just that, to steer 'no deal' efforts towards a no-confidence vote against him and away from the so-called 'legislative path' that had opened up in recent days, resulting in a further delay to Article 50 and fresh elections being called.

The analysts were not "necessarily convinced" that Johnson's aim was to ram through a 'no deal' result, arguing that his 'Plan A' remained to clinch a revised Brexit deal.

However, ING said that the hurdles to getting any deal - assuming that one materialised - through Parliament were such that the odds of success were just 20.0%, with the European Council meeting that would decide on any proposals, scheduled for 17 October, being the key date to watch for on the calendar.

Hence, it would likely come down to a no-confidence vote once - and only if - all other avenues to block a hard Brexit had been precluded, then "we think the numbers could quickly materialise in favour of a no-confidence motion."

A no confidence vote in early September would likely fail as Tory backbenchers would not want to vote against Johnson while he was still trying to negotiate with the EU, ING's James Smith and Petr Krpata highlighted in a research note sent to clients.

Johnson could have scheduled the Queen's speech immediately before the 31 October Brexit deadline or even afterwards, but chose otherwise, they pointed out.

"An election that is forced upon the government, and coupled with a further Brexit delay, would allow Mr Johnson to campaign on a tough Brexit stance, without risking the economic impact of a pre-election 'no deal'.

"It would also allow him to tell voters that he didn't want this election or delay, and attack the opposition for trying block Brexit from happening."

"In other words, we still think a scenario where parliament forces an Article 50 extension along with an early general election (likely to take place post - October 31) is still narrowly the most likely outcome of all of this - perhaps with a 35% probability."

The odds of the UK exiting without an agreement on 31 October meanwhile were now pegged at 30.0% or "slightly higher".

For the euro/pound exchange rate, ING forecast that it would weaken until the mid-October EU summit loomed closer - with the euro re-testing its multiyear highs at 0.9325 - before stabilising in the early part of the fourth quarter as Parliament delivers a no confidence vote, paving the way for early elections.

"However, it is still too early position for the eventual GBP rebound at this point as we believe things will get worse before they get better."