Wednesday proved to be yet another turbulent session in a rollercoaster week for the Pound as latest Brexit headlines continue to dictate Sterling’s performance. The positive news of a possible breakthrough on the issue of state-aid; counterbalanced with the EU’s continued hard stance on fisheries looking to block an October deal, enabled Sterling to open above 1.10 against the Euro, and above 1.29 against the Dollar this morning.
Yesterday, UK Prime Minister Boris Johnson had a phone call with Charles Michel, President of the European Council. A spokesman for Downing Street confirmed that a variety of issues were discussed, but sadly many “significant areas of difference remain, particularly on fisheries”. As the government continue to work towards an October 15th deadline, French President Emmanuel Macron is spearheading the EU resistance on the issue of fisheries. Yesterday Ireland added their support with Foreign Minister Simon Coveney asserting that the UK must not underestimate the EU’s political leverage on the matter – noting that fish in UK waters are “not British fish, not EU fish”.
As a direct result of Coveney’s comments, markets saw a short-term GBP selloff. GBPEUR was able to open not far from the 1.10 mark at 1.0989, but after a tough session finally closed off the day at 1.0974.
As for GBPUSD – cable opened the session at 1.2922, depreciating only slighting during the day, closing off at 1.2912.
While Sterling proves to be incredibly sensitive to any news released, Chief Negotiator David Frost informed the House of Commons Brexit Committee that in regard to state aid and governance, “I can quite see us being ready to use them just as much as the EU in the future. Other EU countries subside quite often more than we do and that could definitely have impact on us.”
Addressing the wider-picture, Frost went on to add that “a deal is eminently achievable and can be achieved, but it's also possible we won't get there”. In attendance at the meeting also was Michael Gove, who insisted that the estimations of a 60% chance of UK-EU trade deal is “about right”.
With Sterling dominating headlines, EURUSD saw limited price action yesterday. The pair opened at 1.1758, closing off just above at 1.1766.
On the data front, the main event of the day is the Bank of England FPC Statement, followed by the ECB Monetary Policy Meeting Accounts. Later in the afternoon we also have the weekly US Labour reports and speeches from Fed members Barkin and Kaplan.