Morning Brief – Cummings and Goings

Cummings and Goings

The most divisive thing in the United Kingdom since Brexit seems to be the adherence of the Prime Minister’s Chief advisor, Dominic Cummings, to the lockdown rules. If you’ve somehow managed to ignore the story, it concerns allegations that the senior advisor travelled an agonisingly precise 264 miles to a family home in Durham after contracting coronavirus. To add insult to injury, some days later and presumably after his recovery, he is supposed to have driven to a local beauty spot, Barnard Castle, where he took a walk. Punchy stuff, eh?

The UK public has been up in arms. I get it: ‘if the advisor [read government] isn’t following its own advice then why should I?’, people have been asking themselves. I’m not going to weigh in on the debate but some parts of it are relevant to the Pound. With Johnson’s defence of Mr Cummings on Sunday night and the advisor’s persistence that he “behaved reasonably and legally”, a wedge has been driven between those condemning his actions within the public and the government. Twitter of course is a breeding ground of opinion and band-wagonning. But people expressing their opinions there seemed to truly feel the actions of the advisor were indefensible and therefore, to them, the rules of the lockdown no longer applied.

There is a reason that the response to coronavirus has been framed as a war – it is to invoke a sense of solidarity within the public to prevent people from shirking the rules. An appeal to the so-called Blitz spirit is often a far more powerful tool than fines or penalties. But it feeds upon one thing: trust. If public trust is dented in a meaningful way then it could inhibit the government’s ability to enforce its gradual transition to stage three of the lockdown and on towards social and economic normalisation.

If people flout the rules they risk undermining efforts to control the R0 rate – the rate of infection – and the number of cases will rise along with the reintroduction of tougher lockdown measures. All in all the UK economy would open up slower than those nations that achieve a more coordinated emergence from lockdown to the detriment of the GB Pound. The politicisation of colloquialisms is a particularly dangerous tool. Unfortunately the “do as I say and not as i do” could prove to undermine Johnson’s government.

Unsurprisingly, GBP didn’t care a great deal yesterday. Not only was volume traded thin given the UK and US holidays yesterday, the Pound is already at discounted levels. More importantly the issue is not, or at least shouldn’t be in the eyes of the market, significant enough to destabilise the government. I suspect this will be long forgotten soon, however, it is worth noting one potential impact upon the Pound from developments in this story.

The former role of the senior advisor in Brexit undoubtedly has an influence upon the public’s varying perspective. Given the pivotal moment that Brexit negotiations are about to reach a resignation from Cummings could even prove GBP positive. Cummings is known to favour a hard Brexit with a persuasion towards a ‘Singapore-on-Thames’ style of economic and political distancing from the Union. Britain has until 30th June to request an extension from the EU to the transition period otherwise its out on 31st December. By removing the risk of Cummings encouraging the position of Johnson to allow the deadline to expire, the Pound could rise in value.

Discussion and Analysis by Charles Porter

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