The pound rallied on Thursday against both the euro and US dollar after UK Prime Minister Boris Johnson and his Irish counterpart Leo Varadkar issued a joint statement following their meeting earlier in the day which said they “could see a pathway to a possible deal”.
Their meeting at a country house on The Wirral was seen as a last-ditch attempt to reach an acceptable deal for the UK’s withdrawal from the European Union, set to happen in less than 4 weeks’ time on October 31st.
Johnson’s proposed deal replaced the controversial Irish back stop from Theresa May’s deal which proved so unpopular in Parliament, with a plan that comprises Northern Ireland leaving the EU with UK but avoided the need for a hard Northern Irish border. The plans proved popular in some camps, but EU leaders seemed unimpressed raising fears that a deal wouldn’t be agreed in time, forcing the UK to apply for an extension to the Brexit date.
Following the successful talks yesterday, Brexit Secretary Stephen Barclay will return to Brussels this morning to recommence negotiations with the EU’s chief negotiator Michel Barnier. Despite lots of work left to do, the UK wants to have something in place before next week’s EU summit on the 17th and 18th October, seen as the last chance for the EU to agree a deal before the 31st.
GBPUSD opened at 1.2233 and traded steadily through the morning, once news of the positive talks between Johnson and Varadkar emerged the pound rose by nearly 2%, eventually reaching a 2-week high of 1.2468.
Likewise GBPEUR opened at 1.1103, remained fairly subdued until the afternoon where it climbed over 2% to reach a 3-week high of 1.1320.
Additional gains have been seen this morning, GBPUSD has broken through 1.25 reaching 1.2537 and GBPEUR touched 1.1371.
US and Chinese trade negotiators held their first day of talks yesterday. US President Donald Trump said the discussions were very successful creating optimism the two sides might be able to reach an agreement, reduce trade tensions and potentially delay a US tariff hike due to come in to force next week.
EURUSD traded from an early morning low of 1.0985 to reach a 3-week high of 1.1034, but dropped back in the afternoon to close at 1.1017.
