Yesterday’s press conference at the EU emergency summit brought a six-month extension to the UK’s exit date (to 31st Oct), with a review on progress in June. Commission President Junker played down the importance of this review, stating that it was “not another cliff edge”. Sterling’s reaction was muted as markets look for more substantial updates that progress is been made with Brexit.
The week ahead is (once again) a key one for Brexit but its hear at last. Meanwhile, the Chancellor of the Exchequer will give his Spring Statement. It is unlikely to herald any immediate policy actions, but will set the context for some important upcoming decisions.
Over the weekend at least one well-known Brexiteer seemed to suggest that he would be prepared to vote for the deal if it is amended to rule out a permanent tie-in to the EU. The PM seems set to return to Brussels to extract such a concession, although the EU is so far still indicating unwillingness to time limit the backstop. Meanwhile, markets have reacted to recent developments by pushing sterling higher. The pound enjoyed its best week since 2017 rising to 1.32 against the US dollar and to 1.16 against the euro.
Expectations that a Soft Brexit deal are accepted will continue to boost GBP exchange rates although the market remains vulnerable to negative updates on Brexit. PM May’s Plan B will voted on again next Tuesday, January 29. This vote, or a change in voting pattern, may well provide the next catalyst for Sterling movements.
In Brexit news, PM May is reported to now be in favour of giving MPs a vote on alternative proposals to her Brexit plan. Then on the other side of Brexit, the EU will today publish a package of 14 contingency proposals aimed at avoiding the worst effects of a ‘no deal’ Brexit. Focus will then turn to US and the Federal Reserve decision last today.
Brexit talks continue, economic data due to support Sterling
GBP/EUR + EUR/GBP Weekly Market Report and Forecast. Time running out for PM May to get a deal done in November.
Yesterday’s UK Cabinet meeting discussed Brexit negotiations, with the focus on options to resolve the Irish border puzzle without the risk of keeping the UK in the EU customs union permanently or the risk of Northern Ireland staying in the customs union without the rest of the UK. Reports suggest that the Cabinet may meet again on the matter later this week