Brexit: What Happens Next + GBP/EUR Update May 8th - 10th May.
Good morning everyone.
The GBP/EUR rate spiked higher towards €1.1750's late Friday on rumours an agreement could be reached between May & Corbyn but as with most rumours, unless they are substantiated then exchange rates tend to fall back which is what we've seen since Friday.
Talk over the last couple of days has changed and become less optimistic with the usual comments from MP’s still suggesting negotiations are “constructive and detailed”. David Liddington, the UK PM’s ‘de facto deputy’, confirmed yesterday that the Brexit process was now unlikely to be completed before the European Parliament elections and so the UK will take part. The PM’s spokesperson said that it was still hoped the process would be completed before MEPs take their seats in July with cross-party talks with Labour still continue. A spokesperson described them as “very robust” but noted that the Government would need to move on its red lines to reach a deal. Meanwhile media sources are suggesting that the Conservative backbench 1922 Committee may be set to reconsider its rules for electing the party leader, paving the way for a potential challenge (once again).
The prime minister had promised that if talks failed, the next step would be to ask Parliament to vote on alternative Brexit options. But Parliament has already tried that, and failed, so the trick is going to be to find a system that forces lawmakers to finally get behind a way forward. It’s worth remembering what the results were last time around. Ken Clarke’s customs union proposal failed by three votes. A proposal for a referendum on the Brexit deal also lost, but it got more votes than the customs union, the result on April 1 was 280 vs 292. The six weeks of Brexit stagnation since then might at least help narrow that gap.
One of the sticking points in the talks with Labour is that the opposition can’t trust that May’s eventual successor will stand by her team’s commitments. Shadow Chancellor John McDonnell says it’s like “trying to enter into a contract with a company that’s going into administration.” That problem is getting more acute as Conservatives increasingly lose patience with May. Graham Brady, the head of the rank-and-file Tories, has given May until 4 p.m. Today to set out a timetable for leaving or find it forced upon her, according to the Telegraph.
GBP/EUR & EUR/GBP Weekly Movements
Market sentiment for the GBP/EUR rate is on a sideway trend at the moment, optimism has dipped since Fridays rumours but still holding around the key level of the €1.1630’s. If we see the rate move LOWER than this for a sustained amount of time, then the likelihood of the rate moving into the high €1.1580s will be high. As with such volatile times the rate could easily move HIGHER on the back of an unexpected Brexit updates (Like we’ve saw last Friday). If we see the rate move above the €1.1680’s for a sustained amount of time then we could see it push towards the €1.17’s once again.
Low Risk takers with pending exchanges that need to be made this week, should consider making their exchange while the interbank rate is above or close to the €1.1650’s. Still no clear sight on what path Brexit will take next which makes holding on a Medium to High Risk move for anyone with exchanges to make this week.
Medium Risk takers with pending exchanges that need to be made this week, could hold on to see what next week bring although a Brexit update could come at any time. A glance ahead at next week’s economic data looks like it could favour Sterling exchange rates so holding off until then could see the rate move back into the €1.17’s.
High Risk takers with pending exchanges that need to be made this week or next are most likely already holding off to see what happens with Brexit before making next exchange but next week’s economic data could see the GBP/EUR rate move back into the €1.17’s at best and anyone holding off to see spikes in the rate should be aiming to make their next exchange in the €1.17’s. GBP/EUR has really struggled to move into the €1.18’s since mid-2017 and looks unlikely to move any higher until a we can see a clear path for Brexit.
GBP/EUR Daily Performance
High of the day so far is €1.1681
Low of the day so far is €1.1634
Resistance at €1.1680’s
Support at €1.1630’s
Daily Trading Range €1.1580’s - €1.1750’s